Imdex Limited Annual Report 2006

Plain-text annual report

2006 Annual General Meeting Meeting Documents Notice of Annual General Meeting & Explanatory Memorandum Proxy Form for Annual General Meeting Corporate Representative Certificate for Annual General Meeting To be held on Thursday 19 October 2006 at the Celtic Club 48 Ord Street West Perth, Western Australia commencing at 11.00am WST      2006 Notice of Annual General Meeting                                                                                                                       2 2006 Notice of Annual General Meeting                                                                     3      2006 Notice of Annual General Meeting  Explanatory Memorandum                                                                                                                                     4                                                                                                                                                      •  •  •  •  •                       2006 Notice of Annual General Meeting Explanatory Memorandum                                                                                                                                                             •  •  •  •  •      5    2006 Notice of Annual General Meeting  Explanatory Memorandum     •                                                                                                                                                        6                                                                                           2006 Notice of Annual General Meeting Explanatory Memorandum                                                                                7 www.imdex.com.au Contents Imdex at a glance Imdex 2006 Snapshot Chairman’s Report Managing Director’s Report Director Proﬁ les Financial Report 2006 1 3 6 9 14 17 Registered Ofﬁ ce Imdex Limited, ABN 78 008 947 813 Level 3, Redgum House 18 Richardson Street West Perth, Western Australia, 6005 PO Box 1325 West Perth WA 6872 Telephone: (+61 8) 9481 5777 Facsimile: (+61 8) 9481 6527 Email: Website: www.imdex.com.au imdex@imdex.com.au Imdex is listed on the Australian Stock Exchange under the ASX code IMD Group Head Office & Registered Office Imdex Limited Level 3, Redgum House 18 Richardson Street WEST PERTH WA 6005 PO Box 1325 WEST PERTH WA 6872 Telephone: +61 8 9481 5777 Facsimile: +61 8 9481 6527 Email: imdex@imdex.com.au Divisions/subsidiaries Australian Mud Company Pty Ltd 5 Pitino Court OSBORNE PARK WA 6017 PO Box 1141 OSBORNE PARK WA 6916 Telephone: +61 8 9445 4000 Facsimile: +61 8 9445 4040 Email: gweston@imdex.com.au Samchem Drilling Fluids & Chemicals Pty Ltd 31 Basalt Street Alrode Ext 7 PO Box 167671 BRACKENDOWNS 1456 South Africa Telephone: +2711 908 5595 Facsimile: +2711 908 5887 Email: samchem@acenet.co.za Surtron Technologies Pty Ltd 5 Pitino Court OSBORNE PARK WA 6017 PO Box 1130 OSBORNE PARK WA 6916 Telephone: +61 8 9445 4050 Facsimile: +61 8 9445 4060 Email: smunyard@imdex.com.au Ace Drilling Products & Rentals 5 Pitino Court OSBORNE PARK WA 6017 PO Box 1148 OSBORNE PARK WA 6916 Telephone: +61 8 9445 4020 Facsimile: +61 8 9445 4040 Email: mgregg@imdex.com.au Reflex Instrument North America Ltd 70-C Mountjoy Street North, Suite 510 Timmins, Ontario, Canada P4N 4V7 Telephone: +1 877 235 2169 Facsimile: +1 705 235 2165 Email: reflexca@ntl.sympatico.ca Reflex Instrument South America Ltda Av, del Parque 4265, Piso 1 Huechuraba, Santiago, Chile Telephone: +56 9 0783 593 Facsimile: +56 2 247 9504 Email:pvazquez@reflexsouthamerica.cl Surtron Technologies Pty Ltd 5 Close Way KALGOORLIE WA 6430 Telephone: +61 8 9091 9511 Facsimile: +61 8 9091 9522 Email: jsmith@imdex.com.au Drillhole Surveying Instruments Pty Ltd T/A Reflex Africa P.O. Box 802, Sundowner, 2161 Unit F2, Metropolitan Park, Wakis Ave, Strijdompark Johannesburg, South Africa Telephone: +27 11 792 0452 Facsimile: +27 11 792 5927 Email:jannie.leeuwner@reflexafrica.co.za Reflex Instruments AB P.O. Box 118 SE-Vallentuna, Sweden Telephone: +46 8 511 80 610 Facsimile: +46 8 511 80 610 Email: info@reflex.se Chardec Consultants Ltd 3 Hyde Close, The Street Lewes BN7 3PA East Sussex Telephone: +44 1273 483 800 Facsimile: +44 1273 483 900 Email: rich@chardec.co.uk Surtron Technologies (UK) Ltd 22a Snowdon Place Stirling Scotland FK8 2JN Telephone: +44 1786 449 890 Email: jhunter@imdex.com.au Representative Offices Western Australia Australian Mud Company Pty Ltd 5 Close Way KALGOORLIE WA 6430 Telephone: +61 8 9021 2925 Facsimile: +61 8 9091 5925 Email: tmcwhinney@imdex.com.au Ace Drilling Products & Rentals 5 Close Way KALGOORLIE WA 6430 Telephone: +61 8 9021 2925 Facsimile: +61 8 9091 5925 Email: dmunro@imdex.com.au Surtron Technologies Pty Ltd Lot 1598 Willis Street NEWMAN WA 6753 PO Box 681 NEWMAN WA 6753 Tel/Facsimile: +61 8 9175 1230 New South Wales Australian Mud Company Pty Ltd 21 Illawarra Avenue CARDIFF NSW 2285 Telephone: +61 2 4953 6165 Facsimile: +61 2 4953 6448 Email: tfuller@imdex.com.au South Australia Australian Mud Company Pty Ltd 20 Alexandra Place ROSE PARK SA 5067 Telephone: +61 8 8364 4110 Facsimile: +61 8 8364 4151 Email: kbooth@imdex.com.au Queensland Australian Mud Company Pty Ltd 1/26 Neon Street SUMNER PARK QLD 4074 PO Box 110 SUMNER PARK QLD 4074 Telephone: +61 7 3279 3199 Facsimile: +61 7 3279 3538 Email: amcbrisbane@imdex.com.au Surtron Technologies Pty Ltd 1/26 Neon Street SUMNER PARK QLD 4074 PO Box 110 SUMNER PARK QLD 4074 Telephone: +61 7 3279 2331 Facsimile: +61 7 3279 3495 Email: surtronec@imdex.com.au International Sales Australian Mud Company Pty Ltd 31 Koala Court, Little Mountain CALOUNDRA QLD 4551 Telephone: +61 7 5437 0373 Facsimile: +61 7 5437 0886 Email: mskull@imdex.com.au Imdex at a glance Imdex Limited is Australia’s leading supplier of drilling products and services to the mining, water well and horizontal directional drilling industries and is expanding its presence in the oil and gas industry. The Board’s continuing strategy is to transform a diverse Australian company into a focused global group providing drilling products and services to the oil and gas, mining, water well and civil industries. The Board remains committed to its plan to build value for Shareholders: • • • • Continue operational earnings improvement within Australia; Move toward an increasing global presence; Achieve an overall improvement in Group ﬁ nancial performance to make Imdex a competitive investment in the Australian market; and Continue to translate the improved performance into dividend income for our Shareholders. Global operations Eastern Europe Sweden Ghana Tanzania Zambia China Laos Thailand Philippines Indonesia South Africa PNG Australia New Zealand Chile Peru Canada USA Imdex 2006 Snapshot Financial Performance • Revenue from continuing operations increased by 67% to $66.8 million in FY06 from $40.0 million in FY05; • Earnings before Interest and Tax (EBIT) increased to $12.0 million in FY06, from $5.5 million in FY05; • Net proﬁ t after tax (NPAT) increased by 91% to $8.0 million, from $4.2 million in FY05. Divisional Highlights • The Australian Mud Company (AMC) traded strongly in FY06, delivering 47% of the Group’s revenue and an EBIT contribution of $5.2 million; • Surtron Technologies (Surtron) off the back of its logging and Coal Bed Methane (CBM) steering activities recorded 43% revenue and 27% EBIT growth in FY06; • Ace Drilling Supplies (Ace) beneﬁ ted from the strong increases in the resources sector and the introduction of the new electronic core orientation tool, lifting revenue by 51% and EBIT by 162% in FY06; • Samchem Drilling Fluids & Chemicals (Samchem) recorded turnover of $10.4 million and EBIT of $0.6 million since its acquisition on 1 August 2005. Delivering on its Strategy • Operational and earnings improvement across all businesses in FY06 with further strong growth forecast for FY07; • Fully Franked Dividend of 1 cent per share paid on 30 March 2006 with a further 1 cent per share dividend due to be paid in October 2006; • The purchase of Swedish-based Reﬂ ex Group and United Kingdom- based Chardec Consultants, effective 1 August 2006; • The non-core Imdex Minerals was sold on 1 July 2005 for $6.3 million; and • The business of Samchem, the South African muds and chemicals company, was acquired effective from 1 August 2005. 2 Revenue from continuing operations Revenue from Imdex Minerals: sold 1 July 2005 Total Revenue Change in percentage - Total Revenue Change in percentage - Revenue from continuing operations Operating proﬁ t before interest, tax, depreciation & amortisation Depreciation & amortisation Earnings before Interest & Tax (normal operations only) EBIT margin Change in percentage - Total EBIT Net interest expense Operating proﬁ t before tax Income tax beneﬁ t/(expense) Net Proﬁ t after Tax (normal operations only) Change in percentage Non-operational items Sino Gas & Energy Limited value uplift RTE/Imdex Joint Venture impairment Tax effect of non-operational items Net Proﬁ t after Tax from Continuing Operations Change in percentage Proﬁ t from discontinuing operations Net Proﬁ t for the Year Change in percentage Total Group EBIT Change in percentage FY06 ($m) 66.8 - 66.8 43% 67% 12.2 (2.4) 9.8 15% 77% (0.2) 9.6 (2.6) 7.0 114% 4.5 (2.3) (1.2) 8.0 143% - 8.0 91% 12.0 118% FY05 ($m) 40.0 6.8 46.8 FY04 ($m) 33.4 6.4 39.8 6.9 (1.3) (1.4) 5.5 12% (0.5) 5.0 (1.7) 3.3 - - - 3.3 0.9 4.2 (1.9) (3.2) (0.6) (3.8) 0.1 (3.7) - - - (3.7) - (3.7) 5.5 (3.2) Basic Earnings per Share (cents) 6.07 3.66 (3.07) Change in percentage Net Assets Change in percentage 66% 32.7 72% 19.0 18.1 Net Tangible Assets per Share (cents) 21.10 16.78 14.59 Change in percentage 26% 3 Imdex 2006 Snapshot continued The Group is delivering strong revenue and earnings growth in all Divisions Normalised* Group Revenue and EBIT Three Year Trend Normalised* Divisional Revenue Three Year trend $80 $70 $60 $50 $40 $30 $20 $10 $0 $35 $30 $25 $20 $15 $10 $5 ) S N O I L L I M ( E U N E V E R ) S N O I L L I M ( S T E S S A T E N $14 $12 $10 $8 $6 $4 $2 $0 ($2) ($4) ) S N O I L L I M ( T I B E ) S N O I L L I M ( E U N E V E R $80 $70 $60 $50 $40 $30 $20 $10 $0 $41.8 $25.0 $23.2 $6.8 $16.9 FY05 FY06 $21.6 $6.4 $11.8 FY04 FY04 FY05 FY06 NORMALISED REVENUE EBIT DRILLING PRODUCTS & SERVICES MINERALS PROCESSING DRILLING FLUIDS & CHEMICALS Strong growth in Net Assets has enabled the Group to continue its international expansion Continued earnings growth has enabled the commencement of a fully franked dividend payment program E R A H S R E P S T N E C 8 6 4 2 0 (2) (4) FY04 FY05 FY06 FY04 FY05 FY06 DIVIDENDS PER SHARE EARNINGS PER SHARE * Normalised revenue includes revenue from discontinued operations separately disclosed in FY05 4 “We have delivered on our strategy in FY06” The Imdex Group is Australia’s leading supplier of drilling products and services to the mining, water well and horizontal drilling industries and is expanding it’s presence in the oil and gas industry. 5 Chairman’s Report It gives me great pleasure to report to you that the year ended 30 June 2006 (FY06) has been another very positive one for the Imdex Group. The Imdex Group has delivered on the strategy outlined at the 2005 Annual General Meeting and has taken valuable steps to position itself as a successful global drilling products and services company. During the year, the Board implemented a strategy to build value for you, our Shareholders, through: • • • Continued operational earnings improvement within Australia; Moving toward an increasing global presence; Achieving an overall improvement in Group ﬁ nancial performance to make Imdex a competitive investment in the Australian market; and • Translating the improved performance into dividend income. The Imdex Group was able to take advantage of continuing strong conditions in the global resources and energy markets and achieved a 67% increase in revenue from continuing operations and a 91% increase in net proﬁ t for the year, taking it to $8.0 million in FY06. This delivered earnings per share of 6.07 cents (FY05: 3.66 cents per share) with a net tangible asset backing per share of 21.10 cents (FY05: 16.78 cents per share). The aim of focusing on our core businesses while establishing a global presence has progressed well during the current year. Notable milestones include the integration of the South African drilling ﬂ uids and chemicals company, Samchem, acquired with effect from 1 August 2005 and ﬁ nalisation of the sale of Imdex Minerals on 1 July 2005. The acquisition of Samchem has contributed positively to the Imdex Group earnings during the eleven months and is very strategic given the continuing uplift in exploration expenditure in the resources and energy sectors in Africa generally. It also provides some interesting diversiﬁ cation through the development and sale of environmental management products and chemicals used in the clay brick manufacturing process. As announced to the market, the Imdex Group has recently acquired the Swedish-based Reﬂ ex Group (Reﬂ ex) and the United Kingdom-based Chardec Consultants Limited (Chardec). Reﬂ ex and Chardec are leading developers and suppliers of borehole survey equipment to the exploration, mining/quarrying and construction industries globally. Their innovative technology offers cost saving solutions through the use of electronic instruments to deliver survey data accurately and in a timely fashion. 6 The Board decided to pay a 1 cent per share fully franked interim dividend in respect of the half year ended 31 December 2005 and is pleased to be able to pay a further 1 cent per share fully franked ﬁ nal dividend in October 2006. The Board’s goal of delivering a sustainable and increasing dividend stream, consistent with the capital needs of the Company, remains a high priority. I would like to thank all our employees, fellow Board members and consultants for their special efforts during the year as it has taken much hard work and dedication to deliver the revenue and proﬁ ts achieved in FY06. I would also like to thank all Shareholders for their support during the current year and trust that this support will continue as the Imdex Group progresses toward establishing a substantial global drilling products and services company. I look forward to seeing many of you at the forthcoming Annual General Meeting to be held in Perth on 19 October 2006. Ian Burston CHAIRMAN Operational synergies and access to cross sell product and service opportunities among international clients are expected through the acquisitions of Reﬂ ex and Chardec. During the year, Directors reappraised the role of the Rashid Trading Establishment/ Imdex Saudi Arabian Joint Venture in the light of other business opportunities available to the Group. The Directors have decided, in accordance with the introduction of Australian Equivalents of International Accounting Standards (A-IFRS), to adopt a conservative view of this investment. Accordingly, the balance of the investment and the outstanding receivable were written off. Nevertheless, Imdex will pursue RTE for the outstanding amount due under the re-structure and any recovered amounts will be recorded as credits through the income statement. These acquisitions are signiﬁ cant in both their size and nature. Following the acquisition in August 2006, the Imdex Group will have a much expanded global presence with access to new clients and markets in North America, South America and South Africa. The acquisitions are expected to generate signiﬁ cant additional EBIT in FY07. The Australian Mud Company has continued to expand its sales proﬁ le both locally and internationally and has delivered record revenue and proﬁ t for the year. Further expansion and growth is expected in FY07 as the identiﬁ cation and implementation of synergies with Samchem builds momentum. The aim for FY07 is to take advantage of the signiﬁ cant increase in exploration expenditure throughout Africa, Mexico, Central and South America by aggressively pursuing opportunities in these countries and regions. Surtron Technologies has continued to be a solid performer for the year with healthy increases in revenue. All divisions within Surtron have performed well with additional growth forecast for FY07. Ace Drilling Supplies has experienced signiﬁ cant growth in FY06 in both the products and rentals divisions. Ace is aiming for increased global growth with the international roll-out of its patented electronic core orientation tool. 7 header report cont’ “Our focus is to continue to grow internationally” 8 Managing Director’s Report In a very active year, the Company made great progress at three levels: • • • ﬁ nancially, we raised net proﬁ t from the ongoing business units by 143%; operationally, we expanded all core businesses; and strategically, we continued the global repositioning of the Company. As we commence the new ﬁ nancial year, the business is stronger, more proﬁ table and has more growth potential. Importantly, as we have extended our offshore presence, we have added greatly to our skills and, as we have expanded our team of people, we have improved our ability to deliver the high standards of service demanded by our customers. There were several highlights in the past year, including: • • • • • • • • strong growth across all core businesses; a rise in group sales from continuing operations of 67% to $66.8 million; growth in earnings before interest and tax of 118% to $12.0 million; an interim dividend payment of 1 cent per share and a 1 cent per share ﬁ nal dividend to be paid in October 2006; agreements to acquire the Swedish-based Reﬂ ex Group and the United Kingdom-based Chardec Consultants; integration of South African-based Samchem, acquired with effect from 1 August 2005; ﬁ nalisation of the sale of Imdex Minerals on 1 July 2005; and repayment of all bank debt. Reﬂ ex and Chardec The acquisitions of Reﬂ ex and Chardec usher in a new phase in the development of the Imdex Group. These acquisitions have furthered the Imdex strategy of establishing a global presence in its core business of drilling products and services. They signiﬁ cantly increase Imdex’s international reach. The direct beneﬁ ts of the acquisitions include access to new markets, technology and skills across a range of geographic locations including Canada, Chile and South Africa. Additional synergies are also expected as these acquisitions complement the existing Imdex businesses. The direct and indirect beneﬁ ts of these acquisitions are expected to add signiﬁ cantly to the Company’s EBIT in FY07. The acquisition of Chardec was completed on 4 August 2006, with an effective date of 1 August 2006. The purchase price for Chardec of GBP6.8 million ($17 million) comprised a payment of 9 Managing Director’s Report continued GBP2.5 million in cash at settlement and a further GBP4.3 million to be paid over the following three years. The acquisition of Reﬂ ex was completed on 10 August 2006 with an effective date of 1 August 2006. The purchase price of $25.4 million was made up of a Convertible Note with a value of $10.4 million and two cash payments, one of $13 million at settlement and another of $2 million to be paid on 31 January 2007. The Convertible Note bears interest at 8% per annum and is convertible into 20.8 million Imdex shares at 50 cents each at any time within two years of the issue of the Note. Under the terms of the Note, conversion will automatically occur upon the Imdex share price reaching $1.00. DRILLING FLUIDS and CHEMICALS The Australian Mud Company Pty Ltd (AMC) AMC, accounting for 47% of total Imdex sales and around half its operating proﬁ t, provides drilling products and services to the mining, oil and gas, water well and horizontal directional drilling industries. It traded strongly during the year generating record sales and EBIT of $5.2 million. AMC’s record trading results reﬂ ect the continued strength of the worldwide resources and energy markets in FY06 which has led to strong growth in exploration and development expenditure, particularly in Africa and Asia. Also important in AMC’s business outcome has been the commitment of its management to provide a superior service to its clients helping to create a strong brand identity within the industry in Australia and overseas. While maintaining its high standards of service to existing clients, AMC management will provide an additional focus on a broader range of international markets including Mexico and Central and South America in the coming year. A further priority in FY07 will be the ongoing integration and growth of Samchem in Africa. Samchem Drilling Fluids and Chemicals (Pty) Ltd The business of Samchem was acquired with effect from 1 August 2005 and has been progressively integrated into the Imdex Group over the past year. In its ﬁ rst 11 months, Samchem’s turnover of $10.4 million exceeded its budgeted revenue by 16% offering encouraging signs for its future growth prospects in the African exploration drilling and oilﬁ eld markets. However, the integration process has been more costly than expected and Samchem’s EBIT of $0.6 million was sharply lower than originally expected due to higher than anticipated one-off integration costs. Samchem has some outstanding business prospects. Its share of the clay brick chemicals market in South Africa has been rising. It has the potential to export into other markets once the business has achieved satisfactory market penetration locally. The development and introduction to the market of its environmental management products continues and should gain pace in FY07. These products are a natural diversiﬁ cation for Samchem as protection of the environment is accorded a higher priority by its customers. 10 DRILLING PRODUCTS and SERVICES Surtron Technologies Pty Ltd (Surtron) Surtron built on its improved FY05 trading performance with a further 43% increase in revenue and a 27% increase in EBIT in FY06. Surtron provides geophysical logging, downhole surveying and directional drilling services. Geophysical logging services are provided to BHP Billiton and Rio Tinto, Australia’s major iron ore producers. Surtron also provides downhole survey services to the major gold producers operating in Australia and directional drilling services to coal seam gas explorers and producers in Australia, the United States and Europe. Surtron’s results in FY06 reﬂ ect the expanding output of these commodities driven by the strong demand for metal and energy products in China, India and Japan and increases in global raw material prices. Higher energy prices and new technologies are contributing to the viability of the coal seam gas industry which is likely to play an increasingly important role in meeting future energy needs. Surtron has provided directional drilling services to the Moranbah gas project in Queensland as well as a number of emerging projects elsewhere in Australia. Early in FY07 Surtron successfully provided directional drilling services to a new coal seam gas project in Scotland which should lead to further work. Additional work in the United States is also expected. Gold producers have been very active due to the strong gold price which has also fuelled increased activity among the junior exploration companies. With capital markets more readily funding these explorers, there has been increased demand for Surtron’s downhole surveying expertise. Ace Drilling Supplies (Ace) Ace markets drilling consumables and downhole motors and cameras to the drilling industry in Australia and internationally. The introduction of its patented electronic core orientation tool as well as a general upsurge in local and international drilling activity resulted in signiﬁ cant increases in revenue and proﬁ t for Ace. Revenue grew by 51% to $11.2 million and EBIT grew impressively by 162% to $3.0 million. Further increases in sales and proﬁ t are expected as a result of broadening recognition of the quality products in the Ace portfolio, wider geographic coverage and continuation of favourable trading conditions in the resources sector. 11 Managing Director’s Report continued In adjusting the value, Imdex has taken into account factors which might have a bearing on the value of SGE. An adjustment of $4.5 million was taken through the income statement to reﬂ ect the enhanced value of this investment. Company Outlook Strong global natural resources and energy markets are supporting continuing growth in all core business units. A strong start to the new ﬁ nancial year among the ongoing business units is already being enhanced by the acquisition of Reﬂ ex and Chardec. As the Chairman announced when he released our ﬁ nancial results in August, we are expecting growth in operating revenue of approximately 45% in FY07 as well as further improvement in EBIT margins. While these results would partly reﬂ ect the strength of international raw material and energy markets, they could not be achieved without the commitment of our highly skilled and growing team of people to technological excellence and customer service as they extend the global reach of the Company. Bernie Ridgeway MANAGING DIRECTOR STRATEGIC INVESTMENTS RTE/Imdex Joint Venture The role of the Company’s Saudi Arabian Joint Venture and the priority being accorded the business changed during the year in the light of other opportunities. The Board has therefore reviewed the value of the Company’s investment. Directors have decided to take a conservative approach and write off the joint venture investment balance and remaining amounts due from Rashid Trading Establishment under the re-structure approved by shareholders in 2004. Imdex will pursue collection of the remaining US$650,000 due under the re-structure agreement. Any amounts recovered will be accounted for as a credit to the income statement. Sino Gas & Energy Limited (SGE) Imdex holds an investment of 15 million shares in SGE, an unlisted public company, engaged in the Chinese energy and gas industry through three Production Sharing Contracts (PSC’s) in the highly prospective Ordos Basin in northern China. Field operations involving drilling, fraccing and ﬂ ow testing predominantly tight gas sands are continuing in the 5,500 square kilometre area of the PSC’s. SGE currently intends to list on the Alternative Investment Market of the UK Stock Exchange in February 2007. The newly adopted A-IFRS accounting standards require Imdex to write up its investment in SGE from cost to reﬂ ect current market value as this investment is classiﬁ ed as being ‘held for trading’. 12 “Our Products and Services are exported to the world” 13 Director Proﬁ les Mr Ian Burston AM Non Executive Chairman Age: 71 years Mr Burston holds a Diploma in Aeronautical Engineering and a Bachelor of Engineering (Mechanical). He is a Fellow of the Institution of Engineers, Australia, a Fellow of the Australasian Institute of Mining and Metallurgy and he is a Fellow of the Australian Institute of Company Directors. Mr Burston was appointed Chairman at the Annual General Meeting held on 22 November 2000. Mr Burston has been the Managing Director of Hamersley Iron, the Chief Executive Ofﬁ cer for Kalgoorlie Consolidated Gold Mines, the Managing Director and Chief Executive Ofﬁ cer of Aurora Gold Ltd and the Managing Director of Portman Limited. Mr Burston’s vast experience at the helm of public companies, both listed and unlisted, makes him well qualiﬁ ed to lead Imdex during this important growth phase of the Company. Mr Bernard Ridgeway B.Bus (ACCTG) ACA Managing Director Age: 52 years Mr Ridgeway was appointed to the Board on 23 May 2000 and appointed Managing Director effective from 3 July 2000. He is a qualiﬁ ed Chartered Accountant and a Member of the Institute of Chartered Accountants in Australia and a Member of the Australian Institute of Company Directors. Mr Ridgeway has been involved with a number of public and private companies for the last 20 years as an Owner, Director or Manager. He embraces a hands-on management style and has extensive experience and expertise in ﬁ nance, administration, marketing and business development. Mr Ross Kelly BE(Hons) FAICD Non Executive Director Age: 68 years Mr Kelly graduated as an engineer from the University of Western Australia and has worked in Australia and many overseas countries. Mr Kelly was appointed to the Board on 14 January 2004. Mr Kelly is a qualiﬁ ed engineer, a fellow of the Institute of Company Directors, a Director of Clough Limited and a commissioner with the Western Australian Football Commission. He has previously been Chairman of Clough Limited, Sumich Group Limited, Orbital Corporation Limited, Beltreco Limited and a Director of Aurora Gold Limited, PA Consulting Services Ltd and the Fremantle Football Club. He has specialised in the mining and heavy process industries and has consulted to many of Australia’s major mining companies and the Western Australian Government. He has also worked in the offshore gas, oil reﬁ ning and steel industries. Mr Kelly was previously a Councillor of the Australian Institute of Company Directors, and a Member of the Advisory Board, Curtin Graduate School of Business. 14 Mr Kevin Dundo B. Com, LLB Non Executive Director Age: 55 years Mr Dundo practises as a lawyer in Perth. He was appointed to the Board on 14 January 2004. He is also a Director of Intrepid Mines Ltd ASX: IAU (formerly NuStar Mining Corporation Limited). Previous directorships include St Barbara Mines Limited (ASX: SBM) and Deﬁ ance Mining Corporation (listed on the Toronto Stock Exchange). Mr Dundo gained a Bachelor of Commerce from the University of Western Australia and a Bachelor of Laws from the Australian National University. Mr Dundo specialises in the commercial and corporate areas (in particular mergers and acquisitions) with experience in the mining sector, the service industry and the ﬁ nancial services industry. Mr Dundo is a Member of the Law Society of Western Australia, a Member of the Law Council of Western Australia, a Fellow of the Australian Society of Certiﬁ ed Practising Accountants and a Member of the Australian Institute of Company Directors. Mr Ivan Freeman N.Dip Chem Tech, N.Dip Prod Eng Non Executive Director Age: 64 years Mr Freeman is the Executive Chairman of the Iscosa group of companies and is based in Johannesburg, South Africa. Mr Freeman was appointed to the Board on 23 August 2005. He holds advanced Diplomas in Chemical Technology and Production Engineering and has completed several courses in business administration, supervisory management, marketing and ﬁ nance. His career has focused mainly on mining and oil exploration related projects and he is well versed in the use of chemical additives that improve the clay brick making process. He is an Associate Member of the South African Clay Brick Association. Administrative and ﬁ scal disciplines form the corner stone of his management style. Mr Stephen Lyons B.Bus (ACCTG) ACA Company Secretary Age: 37 years Mr Lyons is a qualiﬁ ed Chartered Accountant and a Member of the Institute of Chartered Accountants in Australia. He has an audit, corporate services and banking background. He was previously the Company Secretary for the Australian operations of the Swiss based, Société Générale de Surveillance (SGS) Group and has consulted to other private and public companies. He was appointed Company Secretary on 19 November 2001. 15 A “The Group is well positioned to beneﬁ t from strong growth in the global resources market” 16 Financial Report 2006 Directors’ Report Independent Audit Report Directors’ Declaration Auditors’ Independence Declaration Corporate Governance Statement Income Statement Balance Sheet Statement of Changes in Equity Cash Flow Satement Notes to the Financial Report 18 26 28 29 30 35 36 37 38 39 Additional Stock Exchange Information 82 17 Directors’ Report The Directors of Imdex Limited (“Imdex” or “the Company”) present their report together with the annual Financial Report of the Company and its Controlled Entities for the financial year ended 30 June 2006. In order to comply with the provisions of the Corporations Act 2001, the Directors’ report as follows: (a) Directors The names and particulars of the Directors of the Company during or since the end of the financial year are: Name Role Age Particulars Mr I F Burston Independent, Non Executive Chairman 71 Mr B W Ridgeway Managing Director Mr R W Kelly Independent, Non Executive Director 52 68 Mr K A Dundo Independent, Non Executive Director 55 Mechanical Engineer Member of the Audit and Compliance & Remuneration Committees. Director since November 2000. Chartered Accountant Director since May 2000. Engineer Member of the Audit and Compliance & Remuneration Committees. Director since 14 January 2004. Practicing Lawyer Chairman of the Audit and Compliance & Remuneration Committees. Director since 14 January 2004. Mr H H Al-Merry Non Executive Director Mr I R Freeman Non Executive Director Mr J P O’Neil Non Executive Director – Alternate Director to Mr I R Freeman 44 64 59 President of Rashid Trading Establishment (involved in a Joint Venture with Imdex, known as the RTE/Imdex Joint Venture) Director since April 2002. Office vacated 18 August 2006. Chemical Technology and Production Engineer Director since 23 August 2005. Muds and Drilling Fluids Engineer Alternate Director since 23 August 2005. Additional information on the Director’s experience and qualifications is set out under Director Profiles. (b) Directorships of other listed companies Directorships of other listed companies held by the Directors in the 3 years immediately before the end of the financial year are as follows: Name Company Position Period of Directorship Mr I F Burston Aztec Resources Ltd Mincor Resources NL Aviva Corporation Ltd Chairman and Chief Executive Officer Non Executive Director Non Executive Director 2004 – Current 2003 – Current 2003 – Current Mr R W Kelly Mr K A Dundo Clough Limited Clough Limited Orbital Corp Ltd Aurora Gold Limited Non Executive Director Chairman Chairman and Non Executive Director Non Executive Director Since 1996 During 2002 – 2003 Resigned 21 August 2003 Resigned 5 February 2003 Intrepid Mines Ltd (formerly NuStar Mining Corp Ltd) St Barbara Mines Limited Defiance Mining Corporation Non Executive Director 2002 – Current Non Executive Director Non Executive Director 2002 – 2004 2003 – 2004 (c) Company Secretary Mr S J Lyons Chartered Accountant aged 37. Mr Lyons was appointed Company Secretary of Imdex Limited on 19 November 2001. He has an audit, corporate services and banking background. Previously, he was the Company Secretary for the Australian operations of the Swiss based, Société Générale de Surveillance (SGS) Group and has consulted to other private and public companies. Mr Lyons is a Member of the Institute of Chartered Accountants in Australia. 18 Directors’ Report (d) Directors’ Meetings The following table sets out the number of Directors’ meetings (including meetings of committees of Directors) held during the financial year and the number of meetings attended by each Director (while they were a Director or committee member). During the financial year, seven Board meetings, three Audit and Compliance Committee and two Remuneration Committee meetings were held. Board of Directors Audit and Compliance Committee Remuneration Committee Held Attended Held Attended Held Attended I F Burston B W Ridgeway H H Al-Merry R W Kelly K A Dundo I R Freeman 7 7 7 7 7 6 6 7 - 7 7 5 3 - - 3 3 - 2 - - 3 3 - 2 - - 2 2 - 2 - - 2 2 - (e) Directors’ Shareholdings At the date of this report the Directors held the following interests in shares and options of the Company: Directors I F Burston B W Ridgeway H H Al-Merry R W Kelly K A Dundo I R Freeman J P O’Neil – alternate Director to Mr I R Freeman Shares Held Directly Shares Held Indirectly Options Held Directly - - 200,000 - 5,000,000 2,000,000 755,000 - 200,000 65,000 300,000 - - - 16,059,002 12,847,202 - - - - - At the date of this report, the options on issue by the Company are disclosed at (g) below and in Note 31. (f) Remuneration Report Remuneration policy for Directors and Executives The Board seeks the approval of Shareholders in relation to the aggregate of Non Executive Directors’ remuneration and any options that may be granted to Directors. The remuneration for Non Executive Directors is reviewed from time to time, with due regard to current market rates. The remuneration for Non Executive Directors is not linked to the Company’s performance. Other than statutory superannuation, no Non Executive Director is entitled to any additional benefits on retirement from the Company. The Managing Director’s remuneration is determined by the Remuneration Committee with due regard to current market rates. The Managing Director has a short term incentive bonus amounting to 20% of his cash remuneration package that is linked to the EBIT performance of the Company. The balance of his remuneration package is not linked to the Company’s performance. All specified Executives, and all staff of the Company, are subject to formal annual reviews of their performance. The remuneration of specified Executives comprises a fixed monetary total, not linked to the performance of the Company, although bonuses related to the performance of the Company may be agreed between that Executive and the Company from time to time. Refer table on page 21 for further details. 19 Directors’ Report Director and Executives details The Directors of Imdex Limited during the year were: (i) (ii) (iii) (iv) (v) (vi) Mr I F Burston (Non Executive Chairman); Mr B W Ridgeway (Managing Director); Mr R W Kelly (Non Executive Director); Mr K A Dundo (Non Executive Director); Mr H H Al-Merry (Non Executive Director), office vacated 18 August 2006; Mr I R Freeman (Non Executive Director), appointed 23 August 2005; and (vii) Mr J P O’Neil (Non Executive Director), Alternate to Mr I R Freeman, appointed 23 August 2005. The Group Executives of Imdex Limited during the year were: (i) (ii) Mr S J Lyons (Company Secretary); Mr D L Kinley (Group Financial Controller); (iii) Mr G E Weston (General Manager: Australian Mud Company Pty Ltd, Surtron Technologies Pty Ltd and Ace Drilling Supplies); and (iv) Mr C S Munyard (Manager Surtron: Technologies Pty Ltd). Elements of Director and Executive Remuneration Remuneration packages contain the following key elements: (i) Short-term benefits – salary/fees, bonuses and non monetary benefits including the provision of motor vehicles and health benefits; (ii) Post-employment benefits – including superannuation and prescribed retirement benefits; (iii) Equity – share options granted under the Staff Option Scheme as disclosed in Note 31; and (iv) Other benefits. 20 Directors’ Report l a t o T $ 1 4 5 , 4 4 3 - 5 7 8 , 2 8 0 0 5 , 4 5 0 0 5 , 4 5 8 8 2 , 3 4 4 0 7 , 9 7 5 l a t o T $ 2 9 0 6 4 1 , 6 1 4 2 4 1 , 3 8 4 4 1 3 , 2 2 5 7 1 2 , 0 1 4 3 3 1 , 3 2 9 3 5 9 , - - - - - - - - - - - - - t n e m y a p d e s a b - e r a h S n o i t a n m r e T i - g n o l r e h t O t n e m y o p m E l t s o P l s t i f e n e b e e y o p m e m r e t - t r o h S r e h t O h s a C d e l t t e s d e l t t e s - y t i u q E s t h g R & i s t i n U s n o i t p O & s e r a h S s t i f e n e B m r e t e e y o l p m e s t i f e n e b r e h t O - r e p u S n o i t a u n n a r e h t O - n o N y r a t e n o m s u n o B & y r a a S l s e e f $ $ $ $ $ $ $ $ $ $ $ $ : 0 3 t e o N n i t u o t e s o s a l s i n o i t a m r o n f i r e h t r u F . w o e b l t u o t e s e r a n o i t a r e n u m e r ’ s r o t c e r i D f o s l i a t e D s e t o N r o t c e r i D e v i t u c e x E - - - - - - - 0 6 7 , 5 2 - - - - - 0 6 7 , 5 2 - - - - - - - - - - - - - - 9 8 7 , 4 - - - - - 9 8 7 , 4 - - - - - - - 4 6 5 , 3 2 - - - 0 0 5 , 4 0 0 5 , 4 4 6 5 , 2 3 - - - - - - - 1 0 6 , 8 2 - - - - - 1 0 6 , 8 2 - - - - - - - 7 2 8 , 1 6 2 ) i ( - 5 7 8 , 2 8 0 0 0 , 0 5 0 0 0 , 0 5 8 8 2 , 3 4 0 9 9 , 7 8 4 ) i i ( ) i i ( ) i i ( ) i i ( ) i i ( r o t c e r i i D g n g a n a M , y a w e g d R W B i s r o t c e r i D e v i t u c e x E n o N n a m r i a h C , n o t s r u B F I y r r e M - l A H H y l l e K W R o d n u D A K n a m e e r F R I r e h O t h s a C d e l t t e s d e l t t e s - y t i u q E s t i f e n e B m r e t e e y o p m e l s t i f e n e b r e h t O - r e p u S n o i t a u n n a r e h t O - n o N y r a t e n o m s u n o B & y r a a S l s e e f t n e m y a p d e s a b - e r a h S n o i t a n m r e T i - g n o l r e h t O t n e m y o p m E l t s o P l s t i f e n e b e e y o p m e m r e t - t r o h S : w o e b l t u o t e s e r a s e v i t u c e x E p u o r G d e t a r e n u m e r t s e h g h i e h t f o n o i t a r e n u m e r f o s l i a t e D s t h g R & i s t i n U s n o i t p O & s e r a h S $ $ $ $ $ $ $ $ $ $ $ $ - - - - - - 0 0 6 3 , 0 0 4 2 , 0 0 8 1 , 0 0 0 4 2 , - 0 0 8 1 3 , - - - - - - - - - - - - - - 4 2 0 , 3 1 2 6 2 , 0 1 - 6 8 2 , 3 2 - - - - - - 0 1 3 , 5 7 5 6 , 0 1 2 5 8 , 5 2 8 5 6 , 1 1 1 5 1 , 3 1 8 2 6 , 6 6 - - - - - - 2 8 2 , 2 6 4 9 , 0 1 4 1 3 , 9 8 6 0 , 4 1 4 6 7 , 8 2 4 7 3 , 5 6 - - - 0 5 9 , 4 5 3 2 0 , 9 3 7 9 , 3 6 0 0 9 , 4 3 1 3 1 4 , 8 1 1 9 3 5 , 7 3 2 8 3 5 , 9 2 1 2 7 4 , 2 8 2 6 8 , 2 0 7 s e t o N ) i i i ( ) i i i ( ) i i i ( ) i i i ( ) i i i ( r e l l o r t n o C l i i a c n a n F p u o r G l i , y e n K L D , C M A r e g a n a M l a r e n e G , n o t s e W E G * n o r t r u S r e g a n a M , d r a y n u M S C n o r t r u S & e c A y r a t e r c e S y n a p m o C , s n o y L J S s e v i t u c e x E p u o r G l i ' e N O P J . n o r t r u S f o r e g a n a M s a y t i c a p a c i s h n i t o n , l o o T e r o C e c A e h t f o l t n e m p o e v e d e h t o t n o i t a e r n l i e n o d k r o w r o f r a e y t n e r r u c e h t g n i r u d 0 5 9 , 4 5 $ i f o s u n o b a d a p s a w d r a y n u M S C - * 21 Directors’ Report Elements of remuneration related to performance (i) (ii) (iii) Managing Director: Of the cash remuneration package of the Managing Director, 20% is linked to the performance of the Company by way of short term cash incentives. In addition options have been the method by which Imdex has sought to reward key executives in a manner linked to the performance of the Company. Any such options to the Managing Director, or any Director, require the approval by Shareholders in General Meeting. Non Executive Directors: The remuneration of Non Executive Directors is not linked to the performance of the Company. The maximum total remuneration payable to Non Executive Directors was approved by Shareholders at the 2003 Annual General Meeting and is currently $300,000. In the current year remuneration to Non Executive Directors totalled $235,163, including statutory superannuation. The Board determines the apportionment of directors’ fees between each Director. Group Executives: The remuneration of specified Executives generally comprises a fixed monetary total that is not linked to the performance of the Company. Bonuses related to the performance of the Company may, however, be agreed between that Executive and the Company from time to time. In addition, subject to a qualifying period, Group Executives may be issued options in the Staff Option Plan at the discretion of the Board. The percentage of the value of remuneration that consisted of options for each Executive is set out below. Value of options issued to Directors and Executives The following table discloses the value of options granted, exercised or lapsed during the year: Options Granted(i) Options Exercised Options Lapsed Value at grant date Value at exercise date Value at time of lapse Total value of options granted, exercised and lapsed Value of options included in remuneration during the year(ii) Percentage of remuneration for the year that consisted of options $ $ $ $ $ % B W Ridgeway 25,760 S J Lyons D L Kinley 3,600 2,400 G E Weston 24,000 - - - - C S Munyard 1,800 6,167 - - - - - 25,760 25,760 3,600 2,400 3,600 2,400 24,000 24,000 7,967 1,800 7.5% 2.5% 1.7% 7.6% 0.8% (i) (ii) The total value of options granted during the year is calculated based on the fair value of the option at grant date multiplied by the number of options issued during the year; The total value of options included in remuneration for the year is calculated in accordance with Accounting Standard AASB 1046 “Director and Executive Disclosures by Disclosing Entities”, as amended by Accounting Standard AASB 1046A. As the options immediately vest the full value of the option is recognised in remuneration in the current year. (g) Share options (i) Share options granted to Directors and Executives During or since the end of the financial year an aggregate of 3,325,000 options were granted to the following directors and executives of the Group. No options were granted during or since the end of the financial year to Non-Executive Directors. 22 Directors’ Report Name B W Ridgeway S J Lyons D L Kinley G E Weston C S Munyard Number of options granted Issuing entity Number of ordinary shares under option 2,000,000 Imdex Limited 2,000,000 150,000 Imdex Limited 100,000 Imdex Limited 150,000 100,000 1,000,000 Imdex Limited 1,000,000 75,000 Imdex Limited 75,000 (ii) Share options on issue at year end Details of unissued shares or interests under option are: Issuing Entity Imdex Limited Imdex Limited Class of option Class of shares Exercise price of option Issue date of option Expiry date of option Key terms of option Number of shares under option Staff Share Options Staff Share Options Ordinary 35 cents 1 Feb 2006 31 Jan 2011 (aa) 2,660,000 Ordinary 20 cents 1 Aug 2004 31 Jul 2009 (aa) 3,048,333 Imdex Limited Corporate Advisor Options Imdex Limited Corporate Advisor Options Imdex Limited Corporate Advisor Options Imdex Limited Managing Director Options Ordinary 20 cents 23 Dec 2004 31 Jul 2009 (bb) 100,000 Ordinary 20 cents 23 Dec 2004 31 Oct 2007 (cc) 2,000,000 Ordinary 35 cents 23 Dec 2004 31 Oct 2007 (dd) 1,000,000 Ordinary 30 cents 15 Sep 2005 14 Sep 2010 (ee) 2,000,000 (aa) exercisable one year after the date of issue, in one-third lots each year thereafter; (bb) exercisable at any point prior to expiry; (cc) exercisable at any point prior to expiry. The condition that Imdex shares trade at 30 cents for 5 consecutive trading days has now been achieved; (dd) exercisable at any point prior to expiry; and (ee) exercisable at any point from 2 years after date of issue until expiry. (iii) Share options exercised during the year C S Munyard exercised 25,000 options during the year and received 25,000 ordinary shares. The exercise price was 20c per option. No unpaid amounts remain on these shares. (h) Principal Activities The Consolidated Entity’s principal continuing activities during the course of the financial year were the manufacturing and sale of a range of drilling products and services. 23 Directors’ Report (i) Review of Operations A review of the operations for the financial year together with future prospects is contained in the Chairman’s Report, the Managing Director’s Review and the Financial Report. (j) Dividends A fully franked interim dividend of 1 cent per ordinary share was paid on 30 March 2006 to shareholders registered on 23 March 2006. In the prior year no dividends were declared or paid. Since 30 June 2006 the Directors have declared a fully franked final dividend of 1 cent per ordinary share, the financial effect of which has not been reflected in the Financial Report. (k) Changes in State Of Affairs During the financial year, there were no significant changes in the state of affairs of the Consolidated Entity other than referred to in the Financial Statements or notes thereto. (l) Subsequent Events Effective 1 August 2006 the Company acquired 100% of the shares of the Swedish-based Reflex Group (Reflex) and the United Kingdom-based Chardec Consultants Limited (Chardec). The purchase price for Reflex is $25.4 million to be settled $15 million in cash at settlement and the issue of a convertible note with a face value of $10.4 million. The convertible note carries the right to convert into 20.8 million Imdex shares at a price of 50 cents per share at any time until 30 June 2008. The coupon rate will be 8% per annum. Under the terms of the agreement, conversion will be triggered automatically by the Imdex share price reaching $1 per share. Any Imdex shares issued under this note prior to 30 June 2008 will be held in voluntary escrow until 30 June 2008. The purchase price for Chardec is GBP6.8 million (approximately $17 million) to be satisfied through the payment of GBP2.5 million in cash at settlement and a further GBP4.3 million over three years from date of settlement. Apart from these matters, no other matter or circumstance has arisen since the end of the financial year that has significantly affected or may significantly affect the operation of the Consolidated Entity, the results of those operations, the financial position or the state of affairs of the Consolidated Entity in future financial years. Additional disclosures with respect to these acquisitions are impracticable at this stage as the fair value at acquisition balance sheet and other matters relating to the acquisitions are still being finalised. Subsequent to year end the Directors declared a 1 cent per share fully franked dividend with a record date of 10 October 2006 and a payment date of 13 October 2006. The effect of this dividend has not been reflected in this financial report. (m) Future Developments Disclosure of information regarding likely developments in the operations of the Consolidated Entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the Consolidated Entity. Accordingly, this information has not been disclosed in this report. (n) Environmental Regulations In prior years the Company, through Imdex Minerals, was subject to onerous environmental regulations. As described in this Financial Report, Imdex Minerals was sold on 1 July 2005. (o) Non-audit services The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 4 to the Financial Report. (p) Auditor’s Independence Declaration The auditor’s independence declaration is included on page 29 of the Financial Report. 24 Directors’ Report (q) Indemnification of Officers and Auditors During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary, and all Executive Officers of the Company and of any related body corporate against a liability incurred as such a Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. (r) Rounding Off of Amounts The Company is a Company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the Directors’ report and the financial report are rounded off to the nearest thousand dollars. Signed in accordance with a resolution of the Directors made pursuant to S.298(2) of the Corporations Act 2001. On behalf of the Directors Mr I F Burston Chairman Mr Ian Burston Chairman PERTH, Western Australia, 25 August 2006. 25 Independent Audit Report Independent audit report to the members of Imdex Ltd Scope t t I d The financial report and directors’ responsibility d t dit th b Deloitte Touche Tohmatsu ABN 74 490 121 060 Woodside Plaza Level 14 www.deloitte.com.au 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au The financial report comprises the balance sheet, income statement, cash flow statement, statement of changes in equity, a summary of significant accounting policies and other explanatory notes and the directors’ declaration for both Imdex Ltd (the company) and the consolidated entity, for the financial year ended 30 June 2006 as set out on page 28 and pages 35 to 81. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year. The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with Accounting Standards in Australia and the Corporations Act 2001. This includes responsibility for the maintenance of adequate financial records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report. Audit approach We have conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal controls, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected. We performed procedures to form an opinion whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards in Australia and the Corporations Act 2001 so as to present a view which is consistent with our understanding of the company’s and the consolidated entity’s financial position, and performance as represented by the results of their operations, their changes in equity and their cash flows. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates made by the directors. While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls. Liability limited by a scheme approved under Professional Standards Legislation. 26 Independent Audit Report The audit opinion expressed in this report has been formed on the above basis. Audit Opinion In our opinion, the financial report of Imdex Ltd is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2006 and of their performance for the year ended on that date; and (b) complying with Accounting Standards in Australia and the Corporations Regulations 2001. DELOITTE TOUCHE TOHMATSU Keith Jones Partner Chartered Accountants Perth, 25 August 2006 27 Directors’ Declaration The Directors declare that: (a) (b) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; in the Directors’ opinion, the attached Financial Report and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Consolidated Entity; and (c) the Directors have been given the declarations required by s.295A of the Corporations Act 2001. At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee. In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order applies, as detailed in note 23 to the Financial Report will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee. Signed in accordance with a resolution of the Directors made pursuant to s. 303(5) for the Corporations Act 2001. Dated at Perth, 25 August 2006. Ian F Burston Chairman 28 Auditors’ Independence Declaration The Board of Directors Imdex Ltd Level 3 Redgum House 18 Richardson Street WEST PERTH WA 6005 25 August 2006 Dear Board Members Deloitte Touche Tohmatsu ABN 74 490 121 060 Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au Imdex Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Imdex Limited. As lead audit partner for the audit of the financial statements of Imdex Limited for the financial year ended 30 June 2006, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU Keith Jones Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. 29 Corporate Governance Statement (a) ASX Governance Principles and ASX Recommendations The Australian Stock Exchange Corporate Governance Council sets out best practice recommendations, including corporate governance practices and suggested disclosures. ASX Listing Rule 4.10.3 requires companies to disclose the extent to which they have complied with the ASX recommendations and to give reasons for not following them. Unless otherwise indicated the best practice recommendations of the ASX corporate Governance Council, including corporate governance practices and suggested disclosures, have been adopted by the Company for the full year ended 30 June 2006. In addition, the Company has a Corporate Governance section on its website: www.imdex.com.au (under the “Investor” heading) which includes the relevant documentation suggested by the ASX Recommendations. The extent to which Imdex has complied with the ASX Recommendations during the year ended 30 June 2006, and the main corporate governance practices in place are set out below. (b) Principle 1: Lay solid foundation for management and oversight The Board has implemented a Board Charter that formalises the functions and responsibilities of the Board. The Charter is published on the Company’s website. (c) Principle 2: Structure the Board to add value Imdex’s Board structure is consistent with the ASX Recommendations on Principle 2, with the exception that it does not have a separate nomination committee for the reasons detailed below. In addition, excluding Mr J P O’Neil who is an alternate Director for Mr I R Freeman, the Board currently has six Directors, three of whom are considered independent. Despite not having a “majority” of independent Non Executive Directors, the structure of the Board is considered appropriate and adequate at the current time, for the Company’s operations. (i) Board Structure The Board consists of a Non Executive Chairman, four Non Executive Directors and one Executive Director. In accordance with the Company’s Constitution the minimum number of Directors is three. There is no maximum number, although it would be expected that the optimal number of Directors would be five or six. The names of the Directors of the Company in office at the date of this Statement are set out in the Directors’ Report and further details concerning the skills, experience, expertise and term of office of each Director is set out in the Director’s Profiles in the first section of the Annual Report. (ii) Board Independence Directors are expected to bring independent judgement to bear in the decision making of the Board. To facilitate this, each Director has the right to seek independent legal advice at the Consolidated Entity’s expense with the prior approval of the Chairman, which may not be unreasonably withheld. In assessing Director independence, materiality has been determined from both a quantitative and qualitative perspective. An amount of over 5% of turnover is considered material. Similarly, a transaction of any amount, or a relationship, is deemed material if knowledge of it impacts, or may impact, the Shareholders’ understanding of the Director’s performance. The Board has conducted a review of each Director’s independence and reports as follows: 30 Corporate Governance Statement Director Mr I F Burston, Non Executive Chairman Mr B W Ridgeway, Managing Director Mr H H Al-Merry, Non Executive Director Mr R W Kelly, Non Executive Director Mr K A Dundo, Non Executive Director Mr I R Freeman, Non Executive Director Assessment Existence of any matters contained in ASX Recommendation 2.1 affecting Independence Independent Nil Not Independent Managing Director Not Independent Mr Al-Merry is the principal of Rashid Trading Establishment which was involved as a Joint Venture partner with the Company in the Middle East. Independent Independent Nil Nil Not Independent Mr Freeman is a major shareholder, having an indirect interest in 16,059,002 shares of the Company. Mr J P O’Neil, Alternate Director to Mr I R Freeman Not Independent Mr O’Neil is a major shareholder, having an indirect interest in 12,847,202 shares of the Company. (iii) Board Nomination The Board does not have a separate nomination committee and, given the Company’s size, does not intend to form such a committee. However, the composition of the Board is determined using the following principles: • • • The Board should comprise a majority of independent, Non Executive Directors with a broad range of experience, skills and expertise; The Chairman of the Board should be an independent, Non Executive Director; and The roles of the Chairman and the Managing Director should not be exercised by the same individual. (iv) Procedure for the selection and appointment of new Directors to the Board The Company has published on its website, procedures for the selection and appointment of new Directors to the Board. The Company also has terms and conditions which govern the appointment of Non Executive Directors. These are subject to the Company’s Constitution and the Corporations Act 2001, and cover: appointment, retirement, Corporate Governance, remuneration, Board meetings, and Board Committees. The Board does not impose on Directors an arbitrary time limit on their tenure. Under the Company’s Constitution and the ASX Listing Rules however, each Director must retire by rotation within a three year period following their appointment. In such cases, the Director’s nomination for re-election should be based on performance and the needs of the Company. (d) Principle 3: Promote ethical and responsible decision-making (i) Code of Conduct The Company has developed a Code of Conduct that applies to all employees, officers and Directors of the Company. The Code addresses matters relevant to the Company’s legal and other obligations to its Shareholders and covers: the way in which we must discharge our duties; compliance with laws; conflicts of interest; confidentiality; insider trading; the use of the Company’s resources and the environment, health and safety. The Code is published on the Company’s website. (ii) Share Trading Policy The Board has developed a Share Trading Policy that restricts Directors and Senior Management to trading in the Company’s shares during the one month periods following the annual and half yearly results announcements and the Annual General Meeting. At all other times the Chairman must be approached, prior to trading, to determine whether trading at that particular time is appropriate. The Policy also reminds other staff of the laws applying to insider trading and stipulates that employees must not engage in short term trading of Imdex’s shares. 31 Corporate Governance Statement B Each of the Directors has signed an agreement requiring them to provide immediate notification to the Company of any changes in securities held, or controlled, by the Director. The Company makes an immediate notification to the ASX providing details of any changes in a Director’s shareholding. The Policy is published on the Company’s website. (e) Principle 4: Safeguard integrity in financial reporting (i) Statement by the Managing Director and Group Financial Controller The Managing Director and the Group Financial Controller have signed a declaration to the Board attesting to the fact that the 2006 Annual Financial Report presents a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards. (ii) The Audit and Compliance Committee The Audit and Compliance Committee consists of three independent Non Executive Directors and operates under a formal charter approved by the Board. The Charter is published on the Company’s website. The Committee is chaired by an independent Chairperson who is not the Chairman of the Board of Directors. The role of the Committee is to advise on the establishment and maintenance of a framework of internal control, risk management protocols and appropriate ethical standards for the management of the Company. It also gives the Board assurance regarding the quality and reliability of financial information prepared for use by the Board in determining policies for inclusion in Financial Statements. The members of the Audit Committee during the year and at the date of this Statement were: Mr K A Dundo (Chairman); Mr I F Burston; and, Mr R W Kelly. The experience and qualifications of each committee member is set out in the Directors’ Profiles in the first section of the Annual Report. The Company Secretary acts as secretary of this Committee. The external auditors, the Managing Director and the Group Financial Controller are invited to Audit Committee meetings at the discretion of the Committee. The Audit Committee met three times during the year as set out in the Directors’ Report. (iii) External Auditors The Board reviews the performance, skills, cost and other matters when assessing the appointment of external auditors. This review is generally undertaken at the completion of the preparation of the Annual Financial Report and involves discussions with the auditors and the Consolidated Entity's senior management. Information concerning the selection and appointment of external auditors is published on the Company’s website. The external auditors are invited to attend the Annual General Meeting of the Company and to be available to answer questions from Shareholders. (f) Principle 5: Make timely and balanced disclosure (i) Continuous disclosure policies and procedures The Company has developed procedures to ensure that it complies with the disclosure requirements of the ASX Listing Rules. The procedures are published on the Company’s website. The procedures set out who is responsible for determining whether information is of a type or nature that requires disclosure, the Boards role in reviewing the information disclosed to ASX and the procedures for ensuring that the information is released to ASX. All information disclosed to the ASX is published on the Company’s website as soon as practicable. (g) Principle 6: Respect the rights of Shareholders Shareholders Communications Strategy: The Board aims to ensure that Shareholders are informed of all major developments affecting the Consolidated Entity's state of affairs. Information is communicated to Shareholders through: 32 B Corporate Governance Statement (i) the Annual Report distributed to all Shareholders (unless a Shareholder has specifically requested not to receive the Report). The Board ensures that the Annual Report includes relevant information about the operations of the Consolidated Entity during the year, changes in the state of affairs of the Consolidated Entity and details of future developments, in addition to the other disclosures required by the Corporations Act 2001; (ii) the Half-Yearly Report which contains summarised financial information and a review of the operations of the Consolidated Entity during the period. Half-Year Financial Report prepared in accordance with the requirements of Accounting Standards and the Corporations Act 2001 are lodged with the Australian Securities & Investments Commission and the Australian Stock Exchange. The Half-Year Financial Report is sent to any Shareholder who requests them; (iii) regular reports released through the ASX and the media; (iv) proposed major changes in the Consolidated Entity, which may impact on share ownership rights are submitted to a vote of Shareholders; and (v) the Board encourages full participation by Shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Consolidated Entity's strategy and goals. Important issues are presented to the Shareholders as single resolutions. The Shareholders are responsible for voting on the re-appointment of Non Executive Directors. Further information concerning the Company and the full text of the various announcements and reports referred to above are available on the Company’s website: www.imdex.com.au. Further information can also be obtained by emailing the Company at: imdex@imdex.com.au and Shareholders may register on the Company’s website to receive automatic notification of ASX announcements. The auditor is also invited to the Company’s Annual General Meetings and is available to answer Shareholders questions concerning the conduct of the audit. The Company’s Shareholder Communications Strategy is published on the Company’s website. (h) Principle 7: Recognise and manage risk (i) Risk oversight and management policies The Board has sought to minimise the business' risks by focusing on the Company's core business, making changes as outlined in the Chairman’s Report and the Managing Director’s Report. The Board is responsible for ensuring that the Company’s risk management systems are adequate and operating effectively. The Company does not have a separate internal audit function and, given the Company’s size, the Board does not intend to implement such a function. The Board believes that through the Board itself, the Audit Committee and the external auditors there is adequate oversight of the Company’s risk management and internal controls. The risk management policy is published on the Company’s website. (ii) Statement by the Managing Director and Group Financial Controller The Managing Director and the Group Financial Controller have signed a declaration to the Board attesting to the fact that the integrity of Financial Reports are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board, and that the system is operating efficiently and effectively in all material respects. (i) Principle 8: Encourage enhanced performance (i) Performance evaluation of the Board, its Committees, individual Directors and key executives There is an informal process in place to enable the Chairman to discuss and evaluate with each Director their contribution to the Board and to enable that Director to comment on all facets of the operation of the Board. A formal performance evaluation of the Board was not conducted during the year. Given the Company’s size, the Board considers that this process is adequate and does not envisage forming a Nomination Committee to perform this function or to formalise the performance evaluation process. 33 Corporate Governance Statement All other Executives, and all staff of the Company, are subject to formal annual reviews of their performance as set out in the Directors’ Report. The description of the process for performance evaluation is published on the Company’s website. (j) Principle 9: Remunerate fairly and responsibly (i) Company’s remuneration policies Details on the remuneration of Directors and Executives are set out in Note 30. The Company’s remuneration policies are set out in the Remuneration Report contained in the Directors Report. (ii) Remuneration Committee The Remuneration Committee consists of three Non Executive Directors and assists the Board in determining executive remuneration policy, determining the remuneration of Executive Directors and reviewing and approving the remuneration of senior management. The members of the Committee during the year and at the date of this Statement were: Mr K A Dundo (Chairman); Mr I F Burston; and, Mr R W Kelly. The experience and qualifications of each committee member is set out in the Directors’ Profiles in the first section of the Annual Report. The Remuneration Committee Charter is published on the Company’s website. (iii) Non Executive Director’s remuneration The terms and conditions governing the remuneration of Non Executive Director’s are set out in their appointment letter. All Non Executive Directors are remunerated by way of fixed cash fees. Non Executive Directors are not provided with retirement benefits other than statutory superannuation. The maximum total remuneration payable to Non Executive Directors was approved by Shareholders at the 2003 Annual General Meeting and is currently $300,000. No Non Executive Director received options in the Company during the year. (k) Principle 10: Recognise the legitimate interests of stakeholders (i) Code of Conduct As set out in Principle 3 above, the Company has developed and published to its website a Code of Conduct. 34 Income Statement for the ﬁ nancial year ended 30 June 2006 Consolidated Company Year Ended Year Ended Year Ended Year Ended 30 June 2006 30 June 2005 30 June 2006 30 June 2005 Notes $’000 $’000 $’000 $’000 Revenue from sale of goods, rendering of services and operating lease rental Other revenue from operations Total revenue Other income Share of losses of associates accounted for using the equity method Raw materials and consumables used Employee benefit expense Depreciation and amortisation expense Finance costs Change in fair value of investments held for trading Impairment adjustment Other expenses Profit before income tax expense Income tax expense relating to ordinary activities Profit from continuing operations Profit from discontinued operations Profit attributable to ordinary equity holders of Imdex Limited Earnings per share: Basic earnings per share (cents) Diluted earnings per share (cents) Earnings per share from continuing operations: Basic earnings per share from continuing operations (cents) Diluted earnings per share from continuing operations (cents) Dividends per ordinary share: Interim dividend paid (cents) Final dividend declared (cents) 2 2 2 7 2 2 2 7 2 2 3 26 18 18 18 18 19 19 The Income Statement should be read in conjunction with the accompanying notes. 66,614 178 66,792 76 (301) (32,776) (11,086) (2,431) (216) 4,500 (2,275) (10,419) 11,864 40,051 - 40,051 466 - (19,602) (6,859) (1,390) (494) - - (7,167) 5,005 11,379 82 11,461 1,402 - (4,415) (2,179) (1,268) (40) 4,199 (3,460) (3,193) 2,507 7,202 - 7,202 1,752 - (4,068) (1,368) (481) (324) - - (1,737) 976 (3,880) (1,723) (1,329) (909) 7,984 - 3,282 890 1,178 - 7,984 4,172 1,178 67 890 957 6.07 5.95 6.07 5.95 1.00 1.00 3.66 3.66 2.88 2.88 - - 35 Balance Sheet as at 30 June 2006 Consolidated Company Notes 30 June 2006 $’000 30 June 2005 $’000 30 June 2006 $’000 30 June 2005 $’000 Current Assets Cash and Cash Equivalents Trade and Other Receivables Inventories Other Financial Assets Non Current Assets classified as held for sale Total Current Assets Non Current Assets Other Financial Assets Property, Plant and Equipment Goodwill Other Intangible Assets Deferred Tax Assets Total Non Current Assets Total Assets Current Liabilities Trade and Other Payables Borrowings Current Tax Payables Provisions Liabilities directly associated with Non Current Assets classified as held for sale Total Current Liabilities Non Current Liabilities Borrowings Deferred Tax Liabilities Provisions Total Non Current Liabilities Total Liabilities Net Assets Equity Issued Capital Asset Revaluation Reserve Foreign Currency Translation Reserve Employee Equity-Settled Benefits Reserve Retained Profits/(Accumulated Losses) Total Equity 28 5 6 7 26 8 9 10 11 3 12 13 3 14 26 13 3 14 15 16 16 16 17 The Balance Sheet should be read in conjunction with the accompanying notes. 6,421 18,798 9,707 4,512 - 39,438 124 9,967 1,906 1,313 - 13,310 52,748 13,629 1,391 2,058 830 - 17,908 1,503 458 226 2,187 20,095 32,653 26,490 - (494) 105 6,552 32,653 103 13,918 7,030 18 6,453 27,522 1,475 5,890 - 12 515 7,892 35,414 7,972 3,965 530 569 182 13,218 2,883 - 293 3,176 16,394 19,020 19,008 - - 48 (36) 19,020 2,003 5,502 1,081 4,504 - 13,090 2,296 4,088 - - - 6,384 19,474 3,111 498 1,973 189 - 5,771 220 1,038 40 1,298 7,069 12,405 96 4,554 923 3 6,453 12,029 2,984 2,047 - 12 224 5,267 17,296 2,526 4,616 531 107 182 7,962 4,172 - 78 4,250 12,212 5,084 26,490 - - 105 (14,190) 12,405 19,008 - - 48 (13,972) 5,084 36 Statement of Changes in Equity for the ﬁ nancial year ended 30 June 2006 Ordinary Shares Foreign Currency Translation Reserve Employee Equity-Settled Benefits Reserve Asset Revaluation Reserve Retained Earnings / (Accumulated Losses) Total Attributable to Equity Holders of the Entity CONSOLIDATED Notes $'000 $'000 $'000 $'000 $'000 $'000 Balance at 1 July 2004 Revaluation adjustment Net income recognised directly in equity Profit for the period Total recognised income and expense for the period Share based payments Cancellation of shares held by Mr H H Al- Merry on restructure of the RTE/Imdex Joint Venture Balance at 30 June 2005 Exchange differences on translation of foreign operations after taxation Net income recognised directly in equity Profit for the period Total recognised income and expense for the period Dividend paid Share based payments Issue of shares as part consideration for the acquisition of Samchem Issue of equity securities for working capital Share issue costs (net of tax) Options expired Issue of shares under staff option plan Balance at 30 June 2006 16 16 15 16 16 15 15 15 15 15 21,058 - - - - - (2,050) 19,008 - - - - - - 3,592 3,990 (112) 1 11 26,490 - - - - - - - - (494) (494) - - - - - - - - - (494) - - - - - 48 - 48 - - - - - 59 - - - (1) (1) 105 8 (8) (8) - - - - - - - - - - - - - - - - - (4,208) - - 4,172 4,172 - - (36) - - 7,984 7,984 (1,396) - 16,858 (8) (8) 4,172 4,172 48 (2,050) 19,020 (494) (494) 7,984 7,984 (1,396) 59 - 3,592 - - - - 6,552 3,990 (112) - 10 32,653 Ordinary Shares Foreign Currency Translation Reserve Employee Equity-Settled Benefits Reserve Asset Revaluation Reserve Retained Earnings / (Accumulated Losses) Total Attributable to Equity Holders of the Entity COMPANY Notes $'000 $'000 $'000 $'000 $'000 $'000 Balance at 1 July 2004 Revaluation adjustment Net income recognised directly in equity Profit for the period Total recognised income and expense for the period Share based payments Cancellation of shares held by Mr H H Al- Merry on restructure of the RTE/Imdex Joint Venture Balance at 30 June 2005 Profit for the period Total recognised income and expense for the period Dividend paid Share based payments Issue of shares as part consideration for the acquisition of Samchem Issue of equity securities for working capital Share issue costs (net of tax) Options expired Issue of shares under staff option plan Balance at 30 June 2006 16 16 15 16 15 15 15 15 15 21,058 - - - - - (2,050) 19,008 - - - - 3,592 3,990 (112) 1 11 26,490 - - - - - - - - - - - - - - - - - - - - - - - 48 - 48 - - - 59 - - - (1) (1) 105 8 (8) (8) - - - - - - - - - - - - - - - (14,929) - - 957 957 - - (13,972) 1,178 1,178 (1,396) - 6,137 (8) (8) 957 957 48 (2,050) 5,084 1,178 1,178 (1,396) 59 - 3,592 - - - - (14,190) 3,990 (112) - 10 12,405 The Statement of Changes in Equity should be read in conjunction with the accompanying notes. 37 Cash Flow Statement for the ﬁ nancial year ended 30 June 2006 Consolidated Company Year Ended Year Ended Year Ended Year Ended 30 June 2006 30 June 2005 30 June 2006 30 June 2005 Notes $’000 $’000 $’000 $’000 Cash Flows From Operating Activities Receipts from customers Payments to suppliers and employees Other income Dividend received Interest and other costs of finance paid Income tax paid Net cash provided by Operating Activities Cash Flows From Investing Activities Interest and bill discounts received Payment for property, plant and equipment Proceeds from sale of property, plant and equipment Payments for intangible assets Proceeds from receivable - RTE/Imdex Joint Venture Proceeds from sale of Imdex Minerals Payment for the acquisition of the business of Samchem Payment of deferred acquisition costs Net cash provided by/(used in) Investing Activities Cash Flows From Financing Activities Advances from Controlled Entities Proceeds from issue of equity securities Payment for share issue costs Cash received on exercise of options Dividend paid Hire purchase and lease payments Proceeds from borrowings Repayment of borrowings Net cash (used in)/provided by Financing Activities 26 24 15 15 19 13 67,509 (55,633) - - (6) (1,796) 10,074 97 (6,730) 652 - 928 6,271 (3,011) (350) (2,143) - 3,990 (112) 10 (1,396) (1,507) 1,435 (3,625) (1,205) 48,767 (44,975) - - (351) (286) 3,155 16 (2,791) 639 (11) 189 - - (216) (2,174) - - - - - (1,296) 2,479 (1,075) 108 10,568 (10,207) 1,020 344 - - 1,725 82 (3,393) 122 - 928 6,271 (3,011) (350) 649 2,435 3,990 (112) 10 (1,396) (506) 546 (3,625) 1,342 Net Increase in Cash and Cash Equivalents Held 6,726 1,089 3,716 15,135 (16,027) 1,020 688 (351) - 465 18 (1,719) 251 (11) 189 - - (216) (1,488) 657 - - - - (387) 1,682 (1,075) 877 (146) Cash and Cash Equivalents At The Beginning Of The Financial Year Effects of exchange rate changes on the balance of cash and cash equivalents held in foreign currencies Cash and Cash Equivalents At The End Of The Financial Year 28 (a) (364) (1,453) (1,713) (1,567) 28 (a) 59 6,421 - - - (364) 2,003 (1,713) The Cash Flow Statement should be read in conjunction with the accompanying notes. 38 Notes to the Financial Report (cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:54)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:76)(cid:72)(cid:86)(cid:3) (cid:20) The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Urgent Issues Group Interpretations, and complies with other requirements of the law. Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with the A-IFRS ensures that the consolidated financial statements and notes of the Consolidated Entity comply with International Financial Reporting Standards (‘IFRS’). The parent entity financial statements and notes also comply with IFRS except for the disclosure requirements in IAS 32 ‘Financial Instruments: Disclosure and Presentation’ as the Australian equivalent Accounting Standard, AASB 132 ‘Financial Instruments: Disclosure and Presentation’ does not require such disclosures to be presented by the parent entity where its separate financial statements are presented together with the consolidated financial statements of the Consolidated Entity. The financial statements were authorised for issue by the directors on 25 August 2006. (a) Basis of preparation The Financial Report has been prepared on the basis of historical cost except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. In the application of A-IFRS management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by management in the application of A-IFRS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements. Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The Consolidated Entity changed its accounting policies on 1 July 2005 to comply with A-IFRS. The transition to A-IFRS is accounted for in accordance with Accounting Standard AASB 1 ‘First-time Adoption of Australian Equivalents to International Financial Reporting Standards’, with 1 July 2004 as the date of transition. An explanation of how the transition from superseded policies to A-IFRS has affected the Company’s and Consolidated Entity’s financial position, financial performance and cash flows is discussed in note 33. The Directors have also elected under s.334(5) of the Corporations Act 2001 to apply Accounting Standard AASB 119 ‘Employee Benefits’ (December 2004), even though the Standard is not required to be applied until annual reporting periods beginning on or after 1 January 2006. The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2006, the comparative information presented in these financial statements for the year ended 30 June 2005, and in the preparation of the opening A-IFRS balance sheet at 1 July 2004 (as disclosed in note 33), the Consolidated Entity’s date of transition, except for the accounting policies in respect of financial instruments. The Consolidated Entity has not restated comparative information for financial instruments, including derivatives, as permitted under the first-time adoption transitional provisions. Refer note 1 (x) and (y). The following significant accounting policies have been adopted in the preparation and presentation of the Financial Report: (b) Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. (c) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: (i) (ii) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or for receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. 39 Notes to the Financial Report (d) Goodwill Goodwill, representing the excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired, is recognised as an asset and not amortised, but tested for impairment annually and whenever there is an indication that the goodwill may be impaired. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. Refer to note 1 (v). (e) Non-current assets held for sale Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, the asset (or disposal group) is available for immediate sale in its present condition and the sale of the asset (or disposal group) is expected to be completed within one year from the date of classification. (f) Inventories Inventories are valued at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventory on hand by the method most appropriate to each particular class of inventory, with the majority being valued on a first in first out basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. (g) Payables Trade payables and other accounts payable are recognised when the Consolidated Entity becomes obliged to make future payments resulting from the purchase of goods and services. (h) Borrowings Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the borrowing using the effective interest rate method. (i) Property, plant and equipment Land and buildings are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Depreciation is provided on property, plant and equipment. Depreciation is calculated on a straight line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual reporting period. The annual depreciation rates used for each class of assets are as follows: Freehold land: Freehold buildings: nil 5% Plant and equipment: 10% to 40% Equipment rented to third parties: 10% to 40% Equipment under finance lease: 13% to 22.5% (j) Share-based payments Equity-settled share-based payments granted after 7 November 2002 that were unvested as of 1 January 2005, are measured at fair value at the date of grant. Fair value is measured by use of the Black-Scholes Model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Consolidated Entity’s estimate of shares that will eventually vest. 40 Notes to the Financial Report (k) Principles of consolidation The consolidated Financial Report is prepared by combining the financial statements of all the entities that comprise the Consolidated Entity, being the company (the parent entity) and its subsidiaries as defined in Accounting Standard AASB 127 ‘Consolidated and Separate Financial Statements’. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements. On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If, after reassessment, the fair values of the identifiable net assets acquired exceeds the cost of acquisition, the deficiency is credited to profit and loss in the period of acquisition. The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised. The consolidated Financial Report includes the information and results of each subsidiary from the date on which the company obtains control and until such time as the company ceases to control such entity. In preparing the consolidated Financial Report, all intercompany balances and transactions, and unrealised profits arising within the Consolidated Entity are eliminated in full. (l) Borrowing costs Borrowing costs are expensed as incurred. (m) (i) Foreign currency Foreign currency transactions All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting date. Non- monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Exchange differences are recognised in profit or loss in the period in which they arise except that: exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which form part of the net investment in a foreign operation, are recognised in the consolidated financial statements in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment. (ii) Foreign operations On consolidation, the assets and liabilities of the Consolidated Entity’s overseas operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are recognised in the foreign currency translation reserve, and recognised in profit or loss on disposal of the foreign operation. The financial statements of foreign subsidiaries, associates and jointly controlled entities that report in the currency of a hyperinflationary economy are restated in terms of the measuring unit current at the reporting date before they are translated into Australian dollars. Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition to A-IFRS are treated as assets and liabilities of the foreign entity and translated at exchange rates prevailing at the reporting date. (n) Financial assets Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs. Subsequent to initial recognition, investments in subsidiaries are measured at cost. Subsequent to initial recognition, investments in associates are accounted for under the equity method in the consolidated financial statements and the cost method in the Company financial statements. Other financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-to- maturity’ investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. (i) Financial assets at fair value through profit or loss Financial assets held for trading purposes are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in profit or loss. (ii) Held-to-maturity investments Bills of exchange and debentures are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. 41 Notes to the Financial Report (iii) Available-for-sale financial assets Certain shares held by the Consolidated Entity are classified as being available-for-sale and are stated at fair value less impairment. Gains and losses arising from changes in fair value are recognised directly in the available-for-sale revaluation reserve, until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in the available-for-sale revaluation reserve is included in profit or loss for the period. (iv) Loans and receivables Trade receivables, loans, and other receivables are recorded at amortised cost less impairment. (o) (i) Financial instruments issued by the company Debt and equity instruments Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. (ii) Transaction costs on the issue of equity instruments Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued. (iii) Interest and dividends Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments or component parts of compound instruments. (p) (i) Intangible assets Patents Patents are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over their estimated useful lives of 20 years. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period. (ii) Intangible assets acquired in a business combination All potential intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair value can be measured reliably. (q) (i) Taxation Current tax Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). (ii) Deferred tax Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the Financial Report and the corresponding tax base of those items. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) that affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the Consolidated Entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Consolidated Entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company/Consolidated Entity intends to settle its current tax assets and liabilities on a net basis. 42 Notes to the Financial Report (iii) Current and deferred tax for the period. Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess. (iv) Tax consolidation The Company and all its wholly-owned Australian resident entities are part of a tax consolidated group under Australian taxation law. Imdex Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the Company (as head entity in the tax-consolidated group). (r) Leased assets Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. (i) Consolidated Entity as Lessor Amounts due from lessees under finance leases are recorded as receivables. Finance lease receivables are initially recognised at amounts equal to the present value of the minimum lease payments receivable plus the present value of any unguaranteed residual value expected to accrue at the end of the lease term. Finance lease payments are allocated between interest revenue and reduction of the lease receivable over the term of the lease in order to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease. Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. (ii) Consolidated Entity as Lessee Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Consolidated Entity’s general policy on borrowing costs. Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. (s) (i) Revenue Sale of goods Revenue from the sale of goods is recognised when the Consolidated Entity has transferred to the buyer the significant risks and rewards of ownership of the goods. (ii) Rendering of services Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. (iii) Royalties Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement. (iv) Dividend and interest revenue Dividend revenue is recognised on a receivable basis. Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. 43 Notes to the Financial Report (t) (i) Employee benefits Provisions Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Consolidated Entity in respect of services provided by employees up to reporting date. (ii) Defined contribution plans Contributions to defined contribution superannuation plans are expensed when incurred. (u) Government grants Government grants are assistance by the government in the form of transfers of resources to the Consolidated Entity in return for past compliance with certain conditions relating to the operating activities of the entity. Government grants include government assistance where there are no conditions specifically relating to the operating activities of the Consolidated Entity other than the requirement to operate in certain regions or industry sectors. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Consolidated Entity with no future related costs are recognised as income of the period in which it becomes receivable. (v) Impairment of assets At each reporting date, the Consolidated Entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Consolidated Entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash- generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. (w) Provisions Provisions are recognised when the Consolidated Entity has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably. 44 Notes to the Financial Report (x) Comparative information – financial instruments The consolidated entity has elected not to restate comparative information for financial instruments within the scope of Accounting Standards AASB 132 ‘Financial Instruments: Disclosure and Presentation’ and AASB 139 ‘Financial Instruments: Recognition and Measurement’, as permitted on the first-time adoption of A-IFRS. The accounting policies applied to accounting for financial instruments in the current financial year are detailed in notes 1(a) to (w). The following accounting policies were applied to accounting for financial instruments in the comparative financial year: (i) Accounts payable Trade payables and other accounts payable are recognised when the Consolidated Entity becomes obliged to make future payments resulting from the purchase of goods and services. (ii) Financial instruments issued by the company Debt and equity instruments Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. Transaction costs on the issue of equity instruments Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued. Interest and dividends Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments or component parts of compound instruments. (iii) Borrowings Debentures, bank loans and other loans are recorded at an amount equal to the net proceeds received. Interest expense is recognised on an accrual basis. Ancillary costs incurred in connection with the arrangement of borrowings are deferred and amortised over the period of the borrowing. (iv) Investments Investments other than investments in subsidiaries, associates and joint venture entities are recorded at cost. Dividend revenue is recognised on a receivable basis. Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. (v) Receivables Trade receivables and other receivables are recorded at amounts due less any allowance for doubtful debts. (y) Effect of changing the accounting policies for financial instruments The effect of changes in the accounting policies for financial instruments on the balance sheet as at 1 January 2005 as detailed in note 1(x) is nil. 45 Notes to the Financial Report (z) Australian Accounting Standards not yet effective Australian Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ended 30 June 2006: Affected Standards Nature of change to accounting policy Application date of standard* Application date AASB 1: First time adoption of AIFRS AASB139: Financial instruments: Recognition and Measurement AASB 3: Business Combinations AASB 132: Financial Instruments: Disclosure and Presentation AASB101: Presentation of Financial Statements AASB114: Segment reporting AASB117: Leases AASB133: Earnings per Share AASB139: Financial instruments: Recognition and Measurement UIG 4 Determining whether an Arrangement contains a lease UIG 8 Scope of AASB 2 AASB7 Financial Instruments: Disclosures * - reporting period commences on or after A project team has been formed to assess the impact of these new standards. A final assessment has not been made on the expected impact of these standards, however, it is expected that that there will be no significant changes in the Group’s accounting policies. 1 January 2006 1 July 2006 1 January 2007 1 July 2007 The following amendments are not applicable to the Group and therefore have no impact: Affected Standards Comment AASB1023: General Insurance Contracts AASB1028: Life Insurance Contracts AASB4: Insurance Contracts UIG 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds UIG 7 Applying the Restatement Approach under AASB129 Financial Reporting in Hyperinflationary Economies These standards are not applicable to the Consolidated Entity. 46 Notes to the Financial Report (cid:21) (cid:51)(cid:85)(cid:82)(cid:73)(cid:76)(cid:87)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) (a) Revenue from operations Revenue from continuing and discontinued operations consisted of the following items: Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 Revenue from continuing operations Revenue from the sale of goods Revenue from the rendering of services Operating lease rental revenue Other operating revenue Revenue from discontinued operations Revenue from the sale of goods (b) Profit before income tax 47,251 13,843 5,520 178 66,792 30,372 9,679 - - 40,051 5,859 - 5,520 82 11,461 7,202 - - - 7,202 - 6,784 - 6,784 66,792 46,835 11,461 13,986 Other than as disclosed on the face of the income statement, profit before income tax has been arrived at after crediting / (charging) the following gains and losses from continuing and discontinued operations: Grants received for the development of export markets Gain/(loss) on disposal of property, plant and equipment Foreign exchange gain/(loss) Gains attributable to: Continuing operations Discontinued operations Losses attributable to: Continuing operations Discontinued operations - 76 (15) 61 76 - 76 (15) - (15) 61 77 384 (84) 377 461 - 461 (72) (12) (84) 377 - 38 533 571 571 - 571 - - - 571 - 44 (6) 38 50 - 50 - (12) (12) 38 Profit before income tax has been arrived at after charging the following items of income and expense. The line items below combine amounts attributable to both continuing and discontinued operations: Other income Grants received for the development of export markets Gain/(loss) on disposal of property, plant and equipment Management fees from Controlled Entities Dividends from Controlled Entities Other revenue - 76 - - - 76 77 384 - - 5 466 - 38 1,020 344 - 1,402 Depreciation and amortisation of Non Current Assets Depreciation of property, plant and equipment 2,431 1,646 1,268 Finance costs Hire purchase liabilities Interest on loans Other 210 - 6 216 194 335 - 529 40 - - 40 - 44 1,020 688 - 1,752 737 26 333 - 359 47 Notes to the Financial Report (cid:21) (cid:51)(cid:85)(cid:82)(cid:73)(cid:76)(cid:87)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (b) Profit before income tax (continued) Profit before income tax has been arrived at after charging the following items of income and expense. The line items below combine amounts attributable to both continuing and discontinued operations: Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 C Other expenses Commissions Communication Consultancy fees Electricity Foreign exchange (gain)/loss Freight Hire of plant and equipment Insurance Other expenses Legal and professional fees Rent and premises costs Repairs and maintenance Travel and accommodation Vehicle expenses Employee benefits expense Defined contribution superannuation costs Post-employment benefits other than superannuation Equity-settled Share Based Payments Employee benefit expense Consultancy expenses 1,243 503 626 51 (15) 661 168 265 1,957 316 1,275 1,097 1,215 1,057 10,419 2,488 - 2,488 59 - 59 726 320 659 377 (84) 518 811 280 2,192 304 1,013 964 989 748 9,817 612 - 612 23 25 48 24 136 141 13 533 227 7 66 560 246 306 553 216 165 3,193 59 - 59 59 - 59 Cost of sales 32,776 23,180 4,415 Bad debts written off - trade debtors Operating lease rental expense (minimum lease payments) Impairment adjustment Receivable due from Rashid Trading Enterprise Investment in RTE/Imdex Joint Venture (cid:22) (cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:55)(cid:68)(cid:91)(cid:72)(cid:86)(cid:3) 2 1,443 875 1,400 2,275 9 715 - - - 2 312 875 2,585 3,460 120 122 304 362 (6) 305 168 99 714 287 331 586 122 211 3,725 224 - 224 23 25 48 - 7,832 9 278 - - - Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 2,835 1,430 (385) 3,880 3,880 - 3,880 1,034 52 (211) 875 1,723 (848) 875 153 1,564 (388) 1,329 1,329 - 1,329 (8) 53 16 61 909 (848) 61 (a) Income tax recognised in the income statement Tax expense comprises: Current tax expense Deferred tax expense relating to the origination and reversal of temporary differences (Over)/under provision per prior year Total tax expense Attributable to: Continuing operations Discontinued operations 48 Notes to the Financial Report C (cid:22) (cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:55)(cid:68)(cid:91)(cid:72)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows: Profit from continuing operations Profit from discontinued operations Profit from operations Income tax expense calculated at 30% Tax benefit of losses transferred to a controlled entity Non-deductible expenses and capital proceeds relating to the investment in the RTE/Imdex Joint Venture Impairment of investment in RTE/Imdex Joint Venture Intercompany dividends received Bad debts Recoverable amount adjustment - property, plant and equipment Deductible share raising costs Non-deductible expenses Temporary differences not previously brought to account Tax rate differential arising from foreign entities (Over) / under provision of prior year income tax Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 11,864 - 11,864 3,559 - 9 420 - 263 - - 20 - (6) (385) 3,880 5,005 42 5,047 1,514 - - - - (876) 379 (13) 58 24 - (211) 875 2,507 - 2,507 752 - 9 776 (103) 263 - - 20 - - (388) 1,329 976 42 1,018 305 389 379 - (206) (876) - (13) 43 24 - 16 61 The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian law. There has been no change in the corporate tax rate when compared with the previous reporting period. (b) Income tax recognised directly in equity The following current and deferred amounts were charged directly to equity during the period: Current tax: Share issue expenses Deferred tax: Translation of foreign operations 48 212 260 - - - 48 - 48 - - - (c) Current tax assets and liabilities Current tax payable (d) Deferred tax balances Deferred tax assets comprise: Provisions Property, plant and equipment Accruals Foreign currency translation reserves Share issue expenses Deferred tax liabilities comprise: Property, plant and equipment Intellectual property Held for trading financial assets Net deferred tax balances There are no unrecognised deferred tax balances. Tax Consolidation 2,058 530 1,973 531 455 - 262 212 38 967 (146) (19) (1,260) (1,425) (458) 460 - 99 - - 559 (44) - - (44) 515 153 - 90 - 38 281 (59) - (1,260) (1,319) (1,038) 71 119 34 - - 224 - - - - 224 Relevance of tax consolidation to the consolidated entity Legislation to allow groups, comprising a parent entity and its Australian resident wholly-owned entities, to elect to consolidate and be treated as a single entity for income tax purposes was substantively enacted on 21 October 2002. The Company and its wholly-owned Australian resident entities are eligible to consolidate for tax purposes under this legislation and have elected to be taxed as a single entity from 1 July 2003. The head entity in the tax consolidated group for the purposes of the tax consolidation system is Imdex Limited. Nature of tax funding arrangements and tax sharing agreements Entities within the tax-consolidated group have entered into a tax-sharing agreement with the head entity. Under the terms of this agreement, Imdex Limited and each of the entities in the tax consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the net accounting profit or loss of the entity and the current tax rate. Such amounts are reflected in amounts receivable from or payable to other entities in the tax consolidated group. 49 Notes to the Financial Report (cid:23) (cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3) Auditor of the parent entity - Deloitte Touche Tohmatsu Audit or review of the financial report Taxation services Other non-audit services: Other consulting services Other non-audit services: A-IFRS assistance Other auditors - Moore Stephens Audit or review of the financial report Other non-audit services: Accounting assistance and taxation advice (cid:24) (cid:55)(cid:85)(cid:68)(cid:71)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:53)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:3) Consolidated 2006 $ 2005 $ Company 2006 $ 2005 $ 122,190 24,182 9,850 35,439 191,661 27,501 14,462 83,206 82,326 27,300 12,500 205,332 - - 122,190 24,182 9,850 35,439 191,661 - - 83,206 82,326 27,300 12,500 205,332 - - 233,624 205,332 191,661 205,332 Current Trade receivables Allowance for doubtful debts Loans to Controlled Entities Due from Quadripart Investment Holdings (Pty) Ltd Due from Rashid Trading Establishment Other receivables Imdex Minerals receivables classified as held for sale Consolidated Company Notes 2006 $’000 2005 $’000 2006 $’000 2005 $’000 (i) (ii) 27 8 26 18,660 (306) 18,354 - 444 - - - 18,798 11,871 (383) 11,488 - - 1,769 663 (2) 13,918 3,267 (114) 3,153 2,349 - - - - 5,502 2,744 (113) 2,631 - - 1,769 156 (2) 4,554 (i) The average credit period on sales of goods is 60 days. Trade receivables are interest free. An allowance has been made for estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience. The movement in the allowance was recognised in the income statement for the current year. (ii) Loans to Controlled Entities have no specific terms or conditions. (cid:3) Consolidated Company 2006 $’000 2005 $’000 2006 $’000 2005 $’000 421 9,287 9,707 - 9,707 1,070 7,286 8,356 (1,326) 7,030 - 1,081 1,081 - 1,081 1,070 1,179 2,249 (1,326) 923 (cid:25) (cid:44)(cid:81)(cid:89)(cid:72)(cid:81)(cid:87)(cid:82)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3) Current Raw materials - at cost Finished goods - at cost Imdex Minerals classified as held for sale 50 Notes to the Financial Report (cid:26) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:38)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:36)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3) At fair value Held for Trading: Shares At amortised cost (2005: cost) Prepayments Consolidated Company Notes 2006 $’000 2005 $’000 2006 $’000 2005 $’000 (i) 4,500 12 4,512 - 18 18 4,500 4 4,504 - 3 3 (i) The Consolidated Entity holds an investment of 15 million shares (2005: nil) in Sino Gas & Energy Limited, an energy company operating in China. The difference between the previous carrying value (consolidated: nil under the equity method; company: $301k) and fair value (consolidated and company: $4.5million) at year end has been recognised as a change in fair value on the face of the income statement. These shares are classified as held for trading as it is the intention of the Company to dispose of this investment as soon as it is practicable. The fair value of this non-listed investment has been determined using the Directors' best estimate. The Directors have estimated the fair market value by having regard to share placements previously made by Sino Gas and Energy Limited, the results of exploration activity to date, discussions with potential investors and having regard to the fact that Sino is an unlisted entity and the shares held in Sino can not be readily traded on any share market. (cid:27) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:49)(cid:82)(cid:81)(cid:16)(cid:38)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:36)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3) At amortised cost (2005: cost) Investments in Controlled Entities Investment in other entities - RTE / Imdex Joint Venture Deferred acquisition costs Notes (i) Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 - - 124 124 - 1,400 75 1,475 2,172 - 124 2,296 324 2,585 75 2,984 (i) At the Annual General Meeting on 8 November 2004, Shareholders approved the re-structure of the investment in Imdex Arabia and the RTE / Imdex Joint Venture. The main outcomes of the re-structure were: - The cancellation of 10,000,000 shares in Imdex Limited held by Mr H H Al-Merry on 23 November 2004. Refer Note 15; - That RTE pay to Imdex Limited, $US 1.5 million net; and - That, on the completion of the re-structure, the Company’s interest in Imdex Arabia and the RTE / Imdex Joint Venture would be reduced from 49% to 20%. In relation to the US$1.5 million due from Rashid Trading Establishment (RTE), in February 2005, a further binding agreement, including a promissory note and personal guarantee from Mr H H Al-Merry (the principal of RTE and a Director of Imdex) was reached with RTE which required RTE to pay US$100,000 per month to Imdex with the entire amount to be paid by 31 December 2005. As at 30 June 2006, RTE has paid US$850,000 of the total of US$1.5million due to Imdex. Accordingly, the amount due from RTE at 30 June 2006 is US$650,000 (AUD$875,654). The Directors have determined that due to ongoing recovery difficulties, the balance of the receivable (consolidated and company: $875k) and the investment in the Joint Venture (consolidated: $1.4million; company: $2.585million) have become impaired. The impairment adjustment is shown on the face of the income statement. Refer also note 2. 51 Notes to the Financial Report (cid:28) (cid:51)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:15)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) Freehold Land at cost (i) Freehold Buildings at cost (i) Plant and Equipment at cost $’000 $’000 $’000 Equipment Rented to Third Parties at cost $’000 Equipment under hire purchase at cost $’000 Capital works in progress at cost TOTAL $’000 $’000 875 3,278 11,293 622 5,093 - 21,161 - - 874 666 899 353 2,792 - - (584) (43) (1,112) - (1,739) - - 426 - (443) - (17) (875) (3,278) (5,755) - - - (9,908) - - (32) - - - (32) - - 6,222 1,245 4,437 353 12,257 - - 3,006 3,150 574 - 6,730 - - 416 - - - 416 - - (54) - (1,052) - (1,106) - - (71) - - - (71) - - 966 1,245 (2,022) (189) - - - 10,485 5,640 1,937 164 18,226 - 744 7,532 370 1,744 - 10,390 - - (190) (5) (674) - (869) - 98 654 207 687 - 1,646 - (842) (3,941) - - - (4,783) - - 888 (38) (867) - (17) - - 4,943 534 890 - 6,367 - - (9) - (521) - (530) - - - - - - - - - 746 1,058 627 - 2,431 - - (9) - - - (9) - - (612) 533 79 - - - - 5,059 2,125 1,075 - 8,259 - - 1,279 711 3,547 353 5,890 - - 5,426 3,515 862 164 9,967 875 3,278 5,766 622 1,597 - 12,138 - - 451 666 304 298 1,719 - - (384) (43) (99) - (526) - - 431 - (441) - (10) (875) (3,278) (5,755) - - - (9,908) - - (32) - - - (32) - - 477 1,245 1,361 298 3,381 - - 96 3,150 147 - 3,393 - - - - (84) - (84) - - 613 1,245 (1,376) (300) 182 - - 1,186 5,640 48 (2) 6,872 - 744 4,076 370 519 - 5,709 - - - (5) (314) - (319) - 98 225 207 207 - 737 - (842) (3,941) - - - (4,783) - - 36 (38) (8) - (10) - - 396 534 404 - 1,334 - - - - - - - - - 104 1,058 106 - 1,268 - - 138 533 (489) - 182 - - 638 2,125 21 - 2,784 - - 81 711 957 298 2,047 - - 548 3,515 27 (2) 4,088 Consolidated Gross Carrying Value Balance at 30 June 2004 Additions Disposals Transfer Classified as held for sale Other Balance at 30 June 2005 Additions Purchase of business Disposals Impact of exchange rate changes Transfer Balance at 30 June 2006 Accumulated Depreciation Balance at 30 June 2004 Disposals Depreciation expense Classified as held for sale Transfer Balance at 30 June 2005 Disposals Purchase of business Depreciation expense Impact of exchange rate changes Transfer Balance at 30 June 2006 Net Book Value As at 30 June 2005 As at 30 June 2006 Company Gross Carrying Value Balance at 30 June 2004 Additions Disposals Transfer Classified as held for sale Other Balance at 30 June 2005 Additions Disposals Transfer Balance at 30 June 2006 Accumulated Depreciation Balance at 30 June 2004 Disposals Depreciation expense Classified as held for sale Transfer Balance at 30 June 2005 Disposals Depreciation expense Transfer Balance at 30 June 2006 Net Book Value As at 30 June 2005 As at 30 June 2006 52 Notes to the Financial Report (cid:28) (cid:51)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:15)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (i) Land and buildings located at 7-15 Spencer Street, Jandakot, Western Australia and 1 Tichbourne Street, Jandakot, Western Australia, were independently valued in January 2005 by T D Anderson FAPI (Certified Practising Valuer – Reg No.471), of Jones Lang LaSalle, on the basis of existing use at $3,900,000. Land and buildings were sold on 1 July 2005. Refer note 26. Aggregate depreciation allocated, whether expense or capitalised as part of assets during the year: recognised as an the carrying amount of other Freehold Buildings Plant and Equipment Equipment under hire purchase (cid:20)(cid:19) (cid:42)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3) Gross Carrying Amount Balance at beginning of the financial year Recognised from acquisitions during the year Effect of foreign exchange movements Balance at end of the financial year Accumulated Impairment Losses Balance at beginning of the financial year Impairment losses for the year Balance at end of the financial year Net Book Value At the beginning of the financial year At the end of the financial year Consolidated Company 2006 $’000 2005 $’000 2006 $’000 2005 $’000 - 98 - 98 1,804 861 1,162 432 627 687 106 207 2,431 1,646 1,268 737 (cid:3) Notes (i) Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 - 2,492 (586) 1,906 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,906 (i) Goodwill arose during the year on the acquisition by Samchem Drilling Fluids & Chemicals (Pty) Ltd, a wholly owned subsidiary of Imdex Limited, of the business of SA Mud Services (Pty) Ltd and a range of clay and cement chemical additive inventory items effective 1 August 2005. Refer note 24. Samchem Drilling Fluids & Chemcials (Pty) Ltd is considered to be a separate cash generating unit since it operates independently from other Imdex operations in a separate geographical area. The recoverable amount of this goodwill has been determined based on a value in use calculation which uses a 5 year discounted cash flow projection based on the 2007 budget. The projection assumes no additional growth in the business. A discount rate of 8.25% has been used. Management believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount. 53 Notes to the Financial Report (cid:20)(cid:20) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:44)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:86)(cid:3) Patent Costs Balance at beginning of the financial year Additions Written off Balance at end of the financial year Intellectual Property Balance at beginning of the financial year Recognised from acquisitions during the year Effect of foreign exchange movements Balance at end of the financial year Accumulated Impairment Losses Balance at beginning of the financial year Impairment losses for the year Balance at end of the financial year Net Book Value At the beginning of the financial year At the end of the financial year Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 (i) 12 - (12) - - 1,437 (124) 1,313 - - - - 12 - 12 - - - - - - 12 - (12) - - - - - - - - 12 - 12 - - - - - - 12 - 12 - 12 1,313 12 - (i) Intellectual Property arose during the year on the acquisition by Samchem Drilling Fluids & Chemicals (Pty) Ltd, a wholly owned subsidiary of Imdex Limited, of the business of SA Mud Services (Pty) Ltd and a range of clay and cement chemical additive inventory items effective 1 August 2005. Refer note 24. Intellectual Property has an indefinite life due to the uniqueness of the manufacturing processes and products, high cost barriers to entry and the dominant market share held. Intellectual Property is therefore subjected to annual impairment testing. The recoverable amount has been determined based on a value in use calculation which uses a 5 year discounted cash flow projection based on the 2007 budget. The projection assumes no additional growth in the business. A discount rate of 8.25% has been used. Management believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount. (cid:20)(cid:21) (cid:55)(cid:85)(cid:68)(cid:71)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:51)(cid:68)(cid:92)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:3) Trade payables Accruals and other payables Notes (i) Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 11,280 2,349 13,629 6,795 1,177 7,972 2,202 909 3,111 2,208 318 2,526 (i) Trade payables are interest free for periods ranging from 30 to 180 days. Thereafter interest is charged at commercial rates. The consolidated entity has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. 54 Notes to the Financial Report (cid:20)(cid:22) (cid:37)(cid:82)(cid:85)(cid:85)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3) Current borrowings Secured At amortised cost Bank overdraft Bank loan Hire purchase liabilities Imdex Minerals hire purchase liabilities reclassified as discontinued operations Non-current borrowings Unsecured At amortised cost Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 Notes (i) (ii) 22 26 - - 1,391 1,391 - 1,391 467 2,500 1,080 4,047 (82) 3,965 - - 498 498 - 498 1,809 2,500 389 4,698 (82) 4,616 Loans from Controlled Entities (iii) - - - 2,716 Secured At amortised cost Bank loan Hire purchase liabilities (i) (ii) 22 - 1,503 1,503 1,125 1,758 2,883 - 220 220 1,125 331 4,172 (i) Bank Loans comprised fixed and floating rate Commercial Bills. The Company retired all bank loans in December 2005. (ii) The hire purchase liabilities are secured over the assets to which they relate, the current market value of which exceeds the value of the hire purchase liability. The Consolidated Entity does not hold title to the equipment under hire purchase pledged as security. (iii) Loans from Controlled Entities have no specific terms or conditions. (cid:20)(cid:23) (cid:51)(cid:85)(cid:82)(cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 Notes Current provisions Employee entitlements Imdex Minerals employee entitlements reclassified as discontinued operations 26 Non-current provisions Employee entitlements 830 - 830 669 (100) 569 189 - 189 207 (100) 107 226 293 40 78 55 Notes to the Financial Report (cid:20)(cid:24) (cid:44)(cid:86)(cid:86)(cid:88)(cid:72)(cid:71)(cid:3)(cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:3) Issued and Paid Up Capital Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 Notes Fully paid ordinary shares (i) 26,490 19,008 26,490 19,008 (i) Fully paid ordinary shares carry one vote per share and the right to dividends. Consolidated and Company 2006 2005 Notes Number $'000 Number $'000 Ordinary shares Balance at beginning of the financial year 110,055,368 19,008 120,055,368 21,058 Cancellation of shares held by Mr H H Al-Merry on restructure of the RTE/Imdex Joint Venture Issue of shares as part consideration for the acquisition of Samchem Issue of equity securities as part of working capital raising Share issue costs (net of tax) Options expired Issue of shares under staff option plan 8 24 - - (10,000,000) (2,050) 16,059,002 13,300,000 - - 51,667 3,592 3,990 (112) 1 11 - - - - - - - - - - Closing balance at end of the financial year 139,466,037 26,490 110,055,368 19,008 Issuances of other equity securities Details of the Staff Option Plan can be found in note 31. (cid:20)(cid:25) (cid:53)(cid:72)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:86)(cid:3) Asset Revaluation Reserve Foreign Currency Translation Reserve Employee Equity-Settled Benefits Reserve Asset Revaluation Reserve Balance at beginning of the financial year Revaluation adjustment Balance at the end of the financial year Consolidated Company 2006 $’000 2005 $’000 2006 $’000 2005 $’000 - (494) 105 (389) - - - - - 48 48 8 (8) - - - 105 105 - - - - - 48 48 8 (8) - The asset revaluation reserve arose on the revaluation of land and buildings in prior periods. 56 Notes to the Financial Report (cid:20)(cid:25) (cid:53)(cid:72)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) Foreign Currency Translation Reserve Balance at beginning of the financial year Translation of foreign operations after taxation Balance at the end of the financial year Consolidated Company Notes 2006 $’000 2005 $’000 2006 $’000 2005 $’000 - (494) (494) - - - - - - - - - Exchange differences relating to the translation from South African Rand, being the functional currency of the Consolidated Entity's foreign controlled entity in South Africa, into Australian dollars are brought to account by entries made directly to the foreign currency translation reserve. Employee Equity-Settled Benefits Reserve Balance at beginning of the financial year Options issued during the financial year Options exercised during the financial year Options expired during the financial year Balance at the end of the financial year 2 15 15 48 59 (1) (1) 105 - 48 - - 48 48 59 (1) (1) 105 - 48 - - 48 The employee equity-settled benefits reserve arises on the grant of share options to Directors and employees. Amounts are transferred out of the reserve and into issued capital when the options are exercised or expire. Further information regarding the Staff Option Plan is contained in note 31. (cid:20)(cid:26) (cid:53)(cid:72)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:51)(cid:85)(cid:82)(cid:73)(cid:76)(cid:87)(cid:86)(cid:3) Consolidated Company Notes 2006 $’000 2005 $’000 2006 $’000 2005 $’000 Balance at beginning of the financial year Net profit attributable to members of the parent entity Dividends provided for or paid Balance at end of the financial year 19 (36) 7,984 (1,396) 6,552 (4,208) 4,172 - (36) (13,972) 1,178 (1,396) (14,190) (14,929) 957 - (13,972) (cid:20)(cid:27) (cid:40)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:51)(cid:72)(cid:85)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3) Basic earnings per share From continuing operations From discontinued operations Total basic earnings per share Diluted earnings per share From continuing operations From discontinued operations Total diluted earnings per share (a) Basic earnings per share Consolidated 2006 Cents per share 2005 Cents per share 6.07 - 6.07 5.95 - 5.95 2.88 0.78 3.66 2.88 0.78 3.66 The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Earnings (i) Earnings from continuing operations (i) $'000s $'000s 7,984 7,984 4,172 3,282 57 Notes to the Financial Report (cid:20)(cid:27) (cid:40)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:51)(cid:72)(cid:85)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (a) Basic earnings per share (continued) Consolidated 2006 Shares 2005 Shares Weighted average number of ordinary shares for the purposes of basic earnings per share 131,472,906 114,055,368 (i) Earnings used in the calculation of total basic earnings per share and basic earnings per share from continuing operations reconciles to net profit in the income statement as follows: Net profit Earnings used in the calculation of basic EPS Adjustments to exclude profit for the period from discontinued operations Earnings used in the calculation of basic EPS from continuing operations (b) Diluted earnings per share 2006 $'000s 2005 $'000s 7,984 7,984 - 7,984 4,172 4,172 (890) 3,282 The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows: Earnings (ii) Earnings from continuing operations (ii) Consolidated 2006 $'000s 2005 $'000s 7,984 7,984 4,172 3,282 Shares Shares Weighted average number of ordinary shares for the purposes of diluted earnings per share (iii) 134,096,984 114,086,252 (ii) Earnings used in the calculation of total diluted earnings per share and diluted earnings per share from continuing operations reconciles to net profit in the income statement as follows: Net profit Earnings used in the calculation of diluted EPS Adjustments to exclude profit for the period from discontinued operations Earnings used in the calculation of diluted EPS from continuing operations (iii) The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: Weighted average number of ordinary shares used in the calculation of basic EPS Shares deemed to be issued for no consideration in respect of employee and Director options Weighted average number of ordinary shares used in the calculation of diluted EPS (iv) The following potential ordinary shares are not dilutive and are therefore excluded from the weighted average number of ordinary shares for the purposes of diluted earnings per share: Employees and Consultants share options Corporate Advisors share options 58 2006 $'000s 2005 $'000s 7,984 7,984 - 7,984 4,172 4,172 (890) 3,282 2006 Shares 2005 Shares 131,472,906 114,055,368 2,624,078 30,884 134,096,984 114,086,252 2006 Shares 2005 Shares - - - 3,160,000 3,100,000 6,260,000 Notes to the Financial Report (cid:20)(cid:28) (cid:39)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)(cid:86)(cid:3) Recognised amounts Notes 2006 Cents per share 2006 Total $’000 2005 Cents per share 2005 Total $’000 Fully paid ordinary shares - interim dividend franked to 30% (i) 1.00 1,396 Unrecognised amounts Fully paid ordinary shares - final dividend franked to 30% (ii) 1.00 1,396 - - - - (i) The interim, fully franked dividend was paid on 30 March 2006. The record date for determining the entitlement to the interim dividend was 23 March 2006. There are no dividend reinvestment plans in operation. (ii) The final, fully franked dividend was declared on 18 August 2006 with an entitlement date of 10 October 2006. The financial effect of the dividend has not been recognised in the financial statements at 30 June 2006. Consolidated 2006 $'000s 2005 $'000s 5,060 (598) 4,529 - Adjusted franking account balance Impact on franking account of dividends not recognised (cid:21)(cid:19) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:40)(cid:91)(cid:83)(cid:72)(cid:81)(cid:71)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3) (a) Capital expenditure commitments At 30 June 2006 capital expenditure commitments were nil (2005: nil). (b) Lease commitments Hire purchase liabilities and non-cancellable operating lease commitments are disclosed in note 22. (c) Superannuation commitments The Company and its Controlled Entities contribute to various defined contribution employee superannuation funds in accordance with the requirements of the Superannuation Guarantee Administration Act 1992. The contributions are based on a percentage of employee gross salaries. All employees are entitled to benefit on retirement, disability or death. The Company and its Controlled Entities are under no legal obligation to make up any shortfall in the funds assets to meet payments due to employees. (cid:21)(cid:20) (cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3)(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3) Contingent Liabilities Indemnity to power transmission utility Rental bond Department of Mines Minister of State Development Contingent Assets Notes (i) (ii) (i) (i) (ii) (ii) Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 - 100 - - 100 - 16 100 27 12 155 - - 100 - - 100 - 16 100 27 12 155 - (i) Comprise bank guarantees supporting the extension of credit or the performance of the Consolidated Entity in respect of its operations. The Directors are not aware of any circumstance or information which would lead them to believe that these liabilities will crystallise. Consequently no provisions have been made in the Financial Report in respect of these matters. No material losses are expected to arise in respect of these guarantees. (ii) These Contingent Liabilities related to the business of Imdex Minerals which was disposed of during the current year. 59 Notes to the Financial Report (cid:21)(cid:21) (cid:47)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86)(cid:3) (a) Hire Purchases Hire purchase arrangements Hire purchase arrangements relate to plant and equipment with terms of up to 5 years. The Consolidated Entity has options to purchase the equipment for a nominal amount at the conclusion of the arrangements. Hire purchase commitments Hire purchase commitments are payable as follows. Due: Within one year Between one and five years Later than five years Minimum lease payments Less: future finance charges Imdex Minerals hire purchase liabilities reclassified as discontinued operations Minimum future lease payments Present value of minimum future lease payments Consolidated 2006 2005 $’000 $’000 Company 2006 $’000 2005 $’000 Consolidated 2006 2005 $’000 $’000 Company 2006 $’000 2005 $’000 1,569 1,261 534 425 1,391 1,216 498 396 1,591 1,907 226 347 1,503 1,622 220 324 - - - - - - - - 3,160 3,168 760 772 2,894 2,838 718 720 (266) (330) (42) (52) - - - - - (82) - (82) - (82) - (82) 2,894 2,756 718 638 2,894 2,756 718 638 Hire purchase liabilities provided for in the Financial Report Current – Note 13 Non current - Note 13 (b) Operating Leases Operating leasing arrangements 1,391 998 498 307 1,503 1,758 220 331 2,894 2,756 718 638 Operating leases relate to premises and the lease of motor vehicles used by the Consolidated Entity in its operations, generally with terms between 2 and 5 years. Some of the operating leases contain options to extend for further periods and an adjustment to bring the lease payments into line with market rates prevailing at that time. The leases do not contain an option to purchase the leased property. Non-cancellable operating lease payments Within one year Between one and five years Later than five years (cid:21)(cid:22) (cid:54)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3) Parent Entity Imdex Limited Controlled Entities Australian Mud Company Pty Ltd Surtron Technologies Pty Ltd Australian Mud Company Chile SA Samchem Drilling Fluids & Chemicals (Pty) Ltd Consolidated 2006 2005 $’000 $’000 Company 2006 $’000 2005 $’000 791 1,478 851 3,120 537 675 300 1,512 86 11 - 97 251 102 - 353 Notes Country of Incorporation 2006 % 2005 % Ownership Interest (i) Australia (iii), (iv) (iii), (iv) (ii) 24 Australia Australia Chile South Africa 100 100 100 100 100 100 100 - (i) Imdex Limited is the ultimate parent company and is the head entity within the tax consolidated group. (ii) Under Chilean law an audit of this company is not required. (iii) These companies are part of the tax consolidated group. (iv) These wholly-owned subsidiaries have entered into a deed of cross guarantee with Imdex Limited pursuant to ASIC Class Order 98/1418 and are relieved from the requirement to prepare and lodge an audited financial report. These companies became a party to the deed of cross guarantee on 30 June 2006. 60 Notes to the Financial Report (cid:21)(cid:22) (cid:54)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) The consolidated income statement and balance sheet of entities which are party to the deed of cross guarantee are: Income Statement 2006 $’000 Revenue from sale of goods, rendering of services and operating lease rental Other revenue from operations Total revenue Other income Raw materials and consumables used Other expenses Employee expenses Depreciation and amortisation expense Finance costs Profit before income tax expense Income tax expense relating to ordinary activities Profit for the year Balance Sheet Current Assets Cash and Cash Equivalents Trade and Other Receivables Inventories Other Total Current Assets Non Current Assets Property, Plant and Equipment Deferred Tax Assets Total Non Current Assets Total Assets Current Liabilities Trade and Other Payables Borrowings Provisions Total Current Liabilities Non Current Liabilities Borrowings Total Non Current Liabilities Total Liabilities Net Assets Equity Issued Capital Retained Profits * Total Equity * Retained Profit at the beginning of the financial year Net Profit Dividend provided for or paid Retained Profit at the end of the financial year 44,861 87 44,948 30 (22,162) (7,190) (6,967) (1,054) (171) 7,434 (2,239) 5,195 3,814 16,428 7,457 7 27,706 5,294 480 5,774 33,480 10,261 893 848 12,002 1,282 1,282 13,284 20,196 260 19,936 20,196 15,085 5,195 (344) 19,936 61 Notes to the Financial Report (cid:21)(cid:23) (cid:36)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:37)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3) With effect from 1 August 2005, Samchem Drilling Fluids & Chemicals (Pty) Ltd ("Samchem"), Imdex’s 100% owned South African subsidiary, acquired the business of SA Mud Services (Pty) Ltd and a range of clay and cement chemical additive inventory items. SA Mud Services (Pty) Ltd was the largest supplier of drilling fluids and chemicals to the mining industry in Africa. Samchem operates a manufacturing facility in Johannesburg, South Africa from which it manufactures and markets a wide range of chemicals primarily for the drilling industry. At the General Meeting held on 5 August 2005, the shareholders of Imdex Limited approved this acquisition and the associated share issue. Details of the assets and liabilities and goodwill are as follows: Book value Notes $’000 Fair value adjustments $’000 Fair value on acquisition $’000 Trade and other receivables Inventory Property, plant and equipment Intellectual property associated with clay chemical and mud brick manufacture Trade and other payables Provision for employee entitlements Deferred tax liabilities Fair value of net identifiable assets acquired Goodwill on acquisition Total purchase consideration Total purchase consideration Consideration in cash and cash equivalents Less cash and cash equivalents acquired Direct costs relating to the acquisition Shares issued: 16,059,002 ordinary shares of Imdex Limited Operating results of the business of Samchem included in the Consolidated Income Statement of Imdex Limited from acquisition on 1 August 2005: Revenue from the sale of goods Total expenses Profit for the period (i) (i) (iv) (iv) (ii) 15 (iii) 1,735 1,507 373 - (523) (44) - 3,048 - - 43 1,437 - - (417) 1,063 1,735 1,507 416 1,437 (523) (44) (417) 4,111 2,492 6,603 2,901 - 110 3,592 6,603 Results since acquisition $’000 10,391 (9,969) 422 (i) Imdex acquired the business of Samchem, and paid the premium (goodwill) over identifiable assets, due to the fact that Samchem is expected to complement the business of the Australian Mud Company (AMC) (Imdex's wholly owned drilling fluids subsidiary). There were no acquisition provisions created, nor were there any contingent liabilities assumed in the acquisition. The balances of goodwill and intellectual property, noted above, do not tie to the Balance Sheet at 30 June 2006. As set out in Note 1(m)(ii), this is due to the fact that these balances are translated at the exchange rates prevailing at the reporting date, rather than the acquisition date as above. In determining the value attributed to identifiable intangibles and goodwill, the following additional possible intangible assets were identified: customer relationships, brands and unpatented technology. In all cases these intangibles did not meet the “identifiability” criteria and therefore were not recognised. The intellectual property associated with the clay chemical and mud brick manufacture has been assessed as having an indefinite useful life and therefore has not been amortised. This estimated useful life of these assets will be reviewed annually. (ii) The fair value of the ordinary shares issued were 22.37 cents each which was based on the weighted average share price of Imdex's ordinary shares in the 10 trading days prior to the completion of the acquisition. (iii) Had the acquisition of Samchem been effected on 1 July 2005, the Groups revenue would be approximately $67,737k and the profit would be approximately $8,022k. The results of Samchem are included in the Drilling Fluids & Chemicals segment in Note 25. the current year, the beginning of (iv) The Consolidated Cash Flow Statement for the year ended 30 June 2006 records the payment for the acquisition of the business of Samchem as $3,011k. 62 Notes to the Financial Report (cid:21)(cid:24) (cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise income earning assets and revenue, interest bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. Business Segments The Consolidated Entity comprises the following main business segments, based on the Consolidated Entity's management reporting system: (i) Drilling products and services: Down hole surveying, geophysical products; (ii) Minerals Processing: Milling and processing of industrial minerals; and (iii) Drilling fluids and chemicals: Manufacture and supply of drilling fluids and chemicals to the mining, mineral exploration, oil and gas and water well drilling industries. logging and directional drilling; down hole motors, cameras and drilling Geographical Segments In presenting information on the basis of geographical segments, segment revenue is based on geographical location of customers. Segment assets are based on the geographical location of the assets. The Consolidated Entity's business segments operate geographically as follows: (i) Australia: Drilling services; milling and processing of industrial minerals; manufacture and supply of drilling fluids and chemicals; down hole motors, cameras and drilling products; (ii) Saudi Arabia: Supply of drilling fluids and chemicals to the oil and gas industry; (iii) Africa: Drilling services, supply of drilling fluids and chemicals; (iv) South East Asia: Manufacture and supply of drilling fluids and chemicals to the mining and mineral exploration industries. Primary reporting: Business Segments (a) Segment Revenues External revenue 2006 2005 $'000 $'000 Inter-segment Other Total 2006 $'000 2005 $'000 2006 $'000 2005 $'000 2006 $'000 2005 $'000 Drilling fluids and chemicals Drilling products and services Minerals processing Total of all segments Minerals processing revenue reclassified as discontinued operations Unallocated Total revenue - continuing operations 41,593 25,021 - 66,614 23,171 16,880 6,784 46,835 - - - - - - - - 96 2 - 98 - - - - (b) Segment Results Continuing operations Drilling fluids and chemicals * Drilling products and services Total of all segments Eliminations Unallocated Profit before income tax expense Income tax expense Profit for the year - continuing operations Discontinued operations Minerals processing Total of all segments Eliminations Unallocated Profit before income tax expense Income tax expense Profit for the year - discontinued operations Profit for the year * - Includes the impairment adjustment of $2.275k for the RTE/Imdex Joint Venture 41,689 25,023 - 66,712 - 80 66,792 23,171 16,880 6,784 46,835 (6,784) - 40,051 3,462 5,253 8,715 - 3,149 11,864 (3,880) 7,984 - - - - - - - 3,006 2,872 5,878 - (1,365) 4,513 (1,231) 3,282 42 42 - - 42 848 890 7,984 4,172 63 Notes to the Financial Report (cid:21)(cid:24) (cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (c) Segment Assets and Liabilities Drilling fluids and chemicals Drilling products and services Minerals processing Total of all segments Receivable and investment in the RTE/Imdex Joint Venture Eliminations Unallocated Consolidated (d) Other segment information D Assets 2006 $'000 2005 $'000 Liabilities 2006 $'000 2005 $'000 37,808 16,255 - 54,063 - (2,393) 1,078 52,748 13,383 12,474 7,344 33,201 3,169 (2,077) 1,121 35,414 9,492 8,588 - 18,080 - (443) 2,458 20,095 4,600 6,051 900 11,551 - (2,077) 6,920 16,394 Depreciation Acquisition of segment assets Non cash expenses other than depreciation 2006 $'000 2005 $'000 2006 $'000 2005 $'000 2006 $'000 2005 $'000 Drilling fluids and chemicals Drilling products and services Minerals processing Total of all segments Minerals processing reclassified as discountinued operations Unallocated Consolidated 237 2,108 - 2,345 - 86 2,431 147 1,166 256 1,569 (256) 77 1,390 467 6,159 - 6,626 - 104 6,730 250 2,198 65 2,513 (65) 279 2,727 2,305 30 - 2,335 - 301 2,636 41 87 1,101 1,229 (1,101) - 128 Drilling fluids and chemicals Drilling products and services Minerals processing Total of all segments Minerals processing reclassified as discountinued operations Unallocated Consolidated Secondary Reporting: Geographical Segments Australia Saudi Arabia Africa South East Asia China Other Minerals processing revenue reclassified as discontinued operations Total Carrying amounts of associates / joint ventures Impairment losses Share of profits/(losses) of associates / joint ventures 2006 $'000 2005 $'000 2006 $'000 2005 $'000 2006 $'000 2005 $'000 - - - - - - - 3,169 - - 3,169 - - 3,169 (2,275) - - (2,275) - - (2,275) - - - - - - - - - - - - (301) (301) - - - - - - - Revenue from external customers Segment assets Acquisition of segment assets 2006 $'000 2005 $'000 2006 $'000 2005 $'000 2006 $'000 2005 $'000 43,312 - 13,014 8,411 112 1,943 66,792 - 66,792 37,389 - 1,217 4,808 543 2,878 46,835 (6,784) 40,051 43,453 - 5,411 1,470 658 1,756 52,748 - 52,748 29,736 3,169 335 1,264 316 594 35,414 - 35,414 6,351 - 379 - - - 6,730 - 6,730 2,792 - - - - - 2,792 (65) 2,727 64 Notes to the Financial Report D (cid:21)(cid:25) (cid:39)(cid:76)(cid:86)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) On 1 February 2005, Imdex Limited initiated an active program to dispose of the Imdex Minerals Division, its industrial minerals processing business. The sale was one part of the Company’s strategy to focus on its core business as a global provider of “drilling products and services”. As announced to the Australian Stock Exchange on 9 June 2005, Imdex Limited entered into a definitive agreement for the sale of the Imdex Minerals Division with the sale being completed on 1 July 2005. Financial information relating to the discontinued operation for the period to the date of disposal is set out below. Consolidated 2006 $’000 2005 $’000 Notes Profit from discontinued operations Revenue Expenses Profit before income tax Income tax expense Profit after income tax of discontinued operations Gain/(loss) on remeasurement to fair value less costs to sell Gain/(loss) on sale of the division before income tax Income tax expense Gain/(loss) on sale of the division after income tax Profit from discontinued operations Cash flows from discontinued operations Net cash inflow from ordinary activities Net cash inflow from investing activities (including the proceeds from the sale of the business) Net cash inflow from financing Carrying amounts of assets and liabilities Property, plant and equipment Inventories Prepayments Total assets classified as held for sale Hire purchase liabilities Employee entitlements Total liabilities associated with assets classified as held for sale Net assets Details of the sale of the division Consideration received: Cash Additional deferred consideration Total disposal consideration Carrying amount of net assets sold Gain/(loss) on sale before income tax Income tax expense Gain/(loss) on sale after income tax - - - - - - - - - - - 6,271 - 6,271 - - - - - - - - 6,271 - 6,271 (6,271) - - - 6,784 (6,742) 42 848 890 - - - - 890 (1,077) (65) (285) (1,427) 5,125 1,326 2 6,453 (82) (100) (182) 6,271 - - - - - - - (i) (i) As part of the sale agreement, Imdex Limited is entitled to a further cash payment of $1.5million, subject to the future profitability of certain agricultural products which, at the time of sale, were still in the early stages of development and commercialisation. This has not been recognised in the consideration received and the gain on sale of Imdex Minerals as the probability of receiving the deferred consideration cannot be accurately predicted at this stage. If this consideration is recognised in a future period it will increase the gain on the sale of Imdex Minerals. 65 Notes to the Financial Report (cid:21)(cid:26) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:92)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3) (a) Equity interests in related parties Details of the percentage ownership of controlled entities and the wholly owned Group is set out in Note 23. The wholly owned Group consists of Imdex Limited and its wholly owned Controlled Entities. Details of ownership interests in joint venture entities are set out in Note 8. (b) Key management personnel compensation Details of remuneration of key management personnel is set out in Note 30. (c) Key management personnel equity holdings (i) Fully paid ordinary shares issued by Imdex Limited 2006 Balance at 1 July 2005 Granted as compensation Received on exercise of options Net other change Balance at 30 June 2006 Balance held nominally Mr I F Burston Mr B W Ridgeway Mr H H Al-Merry Mr R W Kelly Mr K A Dundo Mr I R Freeman Mr J P O'Neil Mr S J Lyons Mr D L Kinley Mr G E Weston Mr C S Munyard No. 100,000 6,025,000 755,000 65,000 100,000 - - 50,000 120,000 - - 7,215,000 No. No. - - - - - - - - - - - - - - - - - - - - - - 25,000 25,000 No. 100,000 (1,025,000) - 200,000 200,000 16,059,002 12,847,202 - - - - 28,381,204 No. 200,000 5,000,000 755,000 265,000 300,000 16,059,002 12,847,202 50,000 120,000 - 25,000 35,621,204 No. - - - - - - - - - - - - 2005 Balance at 1 July 2004 Granted as compensation Received on exercise of options Net other change Balance at 30 June 2005 Balance held nominally Mr I F Burston Mr B W Ridgeway Mr H H Al-Merry Mr R W Kelly Mr K A Dundo Mr S J Lyons Mr D L Kinley Mr G E Weston Mr C S Munyard Mr I Tan No. 100,000 6,143,993 10,755,000 65,000 - 50,000 120,000 - - - 17,233,993 (ii) Share options issued by Imdex Limited No. No. - - - - - - - - - - - No. - (118,993) (10,000,000) - 100,000 - - - - - No. 100,000 6,025,000 755,000 65,000 100,000 50,000 120,000 - - - (10,018,993) 7,215,000 - - - - - - - - - - - No. - - - - - - - - - - - 2006 Balance at 1 July 2005 Granted as compensation Exercised Balance at 30 June 2006 Bal. vested at 30 June 2006 No. - No. - 2,000,000 2,000,000 - - - - - - - - - - 200,000 200,000 3,000,000 125,000 5,525,000 200,000 200,000 3,000,000 125,000 5,525,000 150,000 100,000 1,000,000 75,000 1,325,000 Vested but not exercisable No. - - - - - - - Vested and exercisable No. - 2,000,000 - - - - - 50,000 100,000 2,000,000 50,000 4,200,000 Options vested during year No. - 2,000,000 - - - - - 50,000 100,000 2,000,000 50,000 4,200,000 Mr I F Burston Mr B W Ridgeway MR H H Al-Merry Mr R W Kelly Mr K A Dundo Mr I R Freeman Mr J P O'Neil Mr S J Lyons Mr D L Kinley Mr G E Weston Mr C S Munyard No. - - - - - - - 50,000 100,000 2,000,000 75,000 2,225,000 No. - 2,000,000 - - - - - 150,000 100,000 1,000,000 75,000 3,325,000 No. - - - - - - - - - - (25,000) (25,000) 66 Notes to the Financial Report (cid:21)(cid:26) 2005 (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:92)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) Balance at 1 July 2004 Granted as compensation Expired Balance at 30 June 2005 Bal. vested at 30 June 2005 Mr I F Burston Mr B W Ridgeway MR H H Al-Merry Mr R W Kelly Mr K A Dundo Mr S J Lyons Mr D L Kinley Mr G E Weston Mr C S Munyard Mr I Tan No. 2,000,000 1,000,000 - - - - - - - - 3,000,000 No. - - - - 50,000 100,000 2,000,000 75,000 - 2,225,000 No. (2,000,000) (1,000,000) - - - - - - - - (3,000,000) No. - - - - - 50,000 100,000 2,000,000 75,000 - 2,225,000 No. - - - - - 50,000 100,000 2,000,000 75,000 - 2,225,000 Vested but not exercisable No. Vested and exercisable No. Options vested during year No. - - - - - 50,000 100,000 2,000,000 75,000 - 2,225,000 - - - - - - - - - - - - - - - - - - - - - - The options granted to key management personnel during the financial year were made in accordance with the Staff Option Plan, as further described in Note 31. Each share option converts into 1 ordinary share of Imdex Limited. No amounts were paid, or are payable, by the recipient on receipt of the option. The options are exercisable in one third lots at the end of each of the first three years during their life. (d) Other transactions with key management personnel (and their related parties) of Imdex Limited (i) Lot 1598 Willis Street, Newman was rented by Surtron Technologies Pty Ltd from Mr G E Weston on normal commercial terms and conditions for the period 1 July 2005 to 16 January 2006. (ii) An amount of R2,364,160 (A$443,516) is owed to Samchem Drilling Fluids & Chemicals (Pty) Ltd, a wholly owned Imdex Limited subsidiary, by Quadripart Investment Holdings (Pty) Ltd, a company in which Mr I R Freeman has an interest. This loan does not carry interest and has no specific terms and conditions. Refer Note 5. (iii) The premises on which the administration and factory buildings of Samchem Drilling Fluids & Chemicals (Pty) Ltd are located in Alrode, Alberton, South Africa are leased on normal commercial terms and conditions from PTS Investments (Pty) Ltd and Basalt Properties (Pty) Ltd, companies in which Mr I R Freeman has an interest. (iv) Mr K A Dundo is a Partner of the legal firm QLegal, that provided legal services to the Imdex Group on normal commercial terms and conditions. (v) As described in these financial statements, Imdex Limited was involved in a Joint Venture with Rashid Trading Establishment (RTE), a Company in which Mr H H Al-Merry is the President and Owner. RTE also acts as the agent of the Joint Venture in some circumstances. There were no amounts recognised during the year relating to transactions between the Company and RTE as agent. During the current year the investment balance in the Joint Venture of $1.4 million and the receivable balance due from RTE of $875k were considered to be fully impaired. The impairment adjustment is shown on the face of the income statement. During the prior year, and as approved by Shareholders at the 2004 Annual General Meeting, 10,000,000 shares held by Mr H H Al-Merry, in connection with the RTE/Imdex Saudi Arabian Joint Venture, were cancelled. (vi) Transactions with Directors Note Consolidated Company 2006 $ 2005 $ 2006 $ 2005 $ Profit from ordinary activities before income tax includes the following items of expenses relating to transactions, other than compensation, with Directors or their personally-related entities: Operating lease rental Legal services d(iii) d(iv) 117,375 - - - 25,604 82,126 25,604 82,126 Total assets arising from transactions, other than compensation, with Directors or their personally-related entities: Goodwill and deferred acquisiton costs Total assets and liabilities arising from transactions, other than compensation, with Directors or their personally-related entities: Current Assets Current Liabilities d(iv) 85,727 - 85,727 - d(ii) d(iii), d(iv) - - - 443,516 54,554 37,572 34,196 37,572 67 E Notes to the Financial Report (cid:21)(cid:26) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:92)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (e) Transactions with other related parties (i) Transactions within the wholly-owned Group Details of dividend revenue received by the ultimate parent entity is disclosed in Note 2. Amounts receivable from, and payable to entities in the wholly-owned Group are disclosed in Note 5 and Note 13. During the financial year Imdex Limited provided management services to entities in the wholly-owned Group as disclosed in Note 2. During the prior year, the Directors elected for wholly-owned Australian entities within the Group to be taxed as a single entity from 1 July 2003. Entities within the tax-consolidated group have entered into a tax-sharing agreement with the head entity. Under the terms of this agreement, Imdex Limited and each of the entities in the tax consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the net accounting profit or loss of the entity and the current tax rate. Such amounts are reflected in amounts receivable from or payable to other entities in the tax consolidated Group. (f) Parent entity The ultimate parent entity in the Consolidated Entity is Imdex Limited, a Company incorporated in Western Australia. (cid:3) (cid:3) (cid:21)(cid:27) (cid:49)(cid:82)(cid:87)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:68)(cid:86)(cid:75)(cid:3)(cid:41)(cid:79)(cid:82)(cid:90)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (a) Reconciliation of cash and cash equivalents For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and in banks and investment in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the year as shown in the Cash Flow Statement is reconciled to the related items in the balance sheet as follows: Cash and cash equivalents Bank overdraft Consolidated Company 2006 $’000 2005 $’000 2006 $’000 2005 $’000 6,421 - 6,421 103 (467) (364) 2,003 - 2,003 96 (1,809) (1,713) Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The fair value of cash and cash equivalents is $6,420,802 (2005: $364,000 negative) (b) Non cash financing and investing activities During the year the Consolidated Entity converted $300k of funds advanced to an investee into an investment in that entity. This is not reflected in the cash flow statement. 68 Notes to the Financial Report (cid:21)(cid:27) (cid:49)(cid:82)(cid:87)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:68)(cid:86)(cid:75)(cid:3)(cid:41)(cid:79)(cid:82)(cid:90)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (c) Reconciliation from the Profit for the Year to Net Cash Provided by Operating Activities E Consolidated 2006 $’000 2005 $’000 Company 2006 $’000 2005 $’000 7,984 4,172 1,178 2,431 301 (97) 59 (76) - 210 (4,500) 2,275 1,528 556 (4,851) (1,284) 18 5,370 150 10,074 1,646 - (16) 48 (384) 32 194 - - 535 55 (2,039) (2,016) (13) 748 193 3,155 1,268 - (82) 59 (38) - 40 (4,199) 3,460 67 1,262 (1,772) (158) 11 585 44 1,725 1,870 - 1,130 3,000 - - - - 1,870 - 1,130 3,000 3,700 500 1,550 5,750 3,700 257 1,509 5,466 - 243 41 284 1,870 - 1,110 2,980 - - - - 1,870 - 1,110 2,980 957 737 - (18) 48 (44) 32 26 - - (14) 73 (97) (1,300) (2) 35 32 465 3,700 500 1,550 5,750 3,700 257 1,509 5,466 - 243 41 284 Profit for the year Adjustments for Depreciation of non-current assets Share of associates losses Interest received disclosed as investing activities Share options expensed Profit on sale of non-current assets Non-cash items disclosed as profit on discontinued operations Interest on hire purchase liabilities Fair value adjustment: Held for Trading investments Impairment adjustment Increase / (decrease) in current tax liability Increase in deferred tax balances Changes in assets and liabilities during the financial year (Increase) / decrease in assets: Current receivables Current inventories Other current assets Increase / (decrease) in liabilities: Current payables Provision for employee entitlements Net Cash Provided by Operating Activities (d) Financing facilities Total facilities available Bank loan Equipment finance facility Multi option facility (including bank overdraft) Facilities utilised at balance sheet date Bank loan Equipment finance facility Multi option facility (including bank overdraft) Facilities not utilised at balance sheet date Bank loan Equipment finance facility Multi option facility (including bank overdraft) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:44)(cid:81)(cid:86)(cid:87)(cid:85)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:21)(cid:28) (a) Financial risk management objectives The Consolidated Entity’s head office encompasses a treasury function that provides services to the business, coordinates access to domestic and international financial markets, and manages the financial risks relating to the operations of the Consolidated Entity. The Consolidated Entity does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Consolidated Entity’s activities expose it primarily to the financial risks of changes in interest rates. (b) Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements. 69 Notes to the Financial Report (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:44)(cid:81)(cid:86)(cid:87)(cid:85)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (cid:21)(cid:28) (c) Foreign currency risk management The group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters and are not material to the financial statements. Refer note 2 for quantum of exchange differences arising. (d) Interest rate risk management The Consolidated Entity is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by maintaining an appropriate mix between fixed and floating rate borrowings. The following table details the Consolidated Entity’s exposure to interest rate risk. Notes Weighted average interest rate Floating interest rate Less than 1 year 1 to 5 years More than 5 years Non-interest bearing Total Fixed Interest Maturing in: % $’000 $’000 $’000 $’000 $’000 $’000 2006 Financial Assets Cash and cash equivalents Receivables Other Financial Liabilities Payables Hire purchase liabilities Employee entitlements 2005 Financial Assets Cash Receivables Other Financial Liabilities Payables Bank overdraft Bank loans Hire purchase liabilities Employee entitlements 28 5 7 8 12 13 (i) 14 28 5 8 12 13 13 13 (i) 14 4.10% - - - 7.58% 5.97% 0.50% - - - 8.95% 7.12% 7.56% 5.97% 6,421 - - 6,421 - - - - 95 - - 95 - 467 2,625 - - 3,092 - - - - - 1,391 - 1,391 - - - - - - 1,000 1,080 - 2,080 - - - - - 1,503 - 1,503 - - - - - - - 1,758 - 1,758 - - - - - - - - - - - - - - - - - - - 6,421 18,798 4,624 23,422 13,629 - 1,056 14,685 8 13,920 1,475 15,403 7,972 - - - 962 8,934 18,798 4,624 29,843 13,629 2,894 1,056 17,579 103 13,920 1,475 15,498 7,972 467 3,625 2,838 962 15,864 (i) Employee entitlements to be settled in cash fall under the definition of financial liabilities. The weighted average interest rate is the discount rate used to calculate Long Service Leave Liability. (e) Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Consolidated Entity. The Consolidated Entity has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Consolidated Entity measures credit risk on a fair value basis. Trade accounts receivable consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance cover is purchased. The Consolidated Entity does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Consolidated Entity’s maximum exposure to credit risk without taking account of the value of any collateral obtained. 70 Notes to the Financial Report (cid:21)(cid:28) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:44)(cid:81)(cid:86)(cid:87)(cid:85)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (f) Fair value of financial instruments The Directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values (2005: net fair value). The determination of fair value is outlined in note 7. (g) Liquidity risk management The Consolidated Entity manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. (cid:46)(cid:72)(cid:92)(cid:3)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:51)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:81)(cid:72)(cid:79)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:22)(cid:19) (a) Details of key management personnel The key management personnel of Imdex Limited during the year were: Mr I F Burston (Independent, Non Executive Chairman) Mr B W Ridgeway (Managing Director) Mr H H Al-Merry (Non Executive Director), office vacated 18 August 2006 Mr R W Kelly (Independent, Non Executive Director) Mr K A Dundo (Independent, Non Executive Director) Mr I R Freeman (Non Executive Director), appointed 23 August 2005 Mr J P O'Neil (Non Executive Director - Alternate to Mr I R Freeman), appointed 23 August 2005 Mr S J Lyons (Company Secretary, Imdex Limited) Mr D L Kinley (Group Financial Controller, Imdex Limited) Mr G E Weston (General Manager: Australian Mud Company Pty Ltd, Surtron Technologies Pty Ltd and Ace Drilling Supplies) Mr C S Munyard (Manager: Surtron Technologies Pty Ltd) (b) Key management personnel compensation policy All key management personnel, and all staff of the Company, are subject to formal annual reviews of their performance. The compensation of key management personnel generally comprises a fixed monetary total, although bonuses related to the performance of the Company may be agreed between the individual and the Company from time to time. The Board seeks the approval of Shareholders, where required, in relation to the aggregate of Non Executive Director compensation and any options that may be granted to Directors. Compensation packages are reviewed and determined with due regard to current market rates. The Managing Director’s compensation is determined by the Remuneration Committee with due regard to current market rates. The Managing Director has a short term incentive bonus amounting to 20% of his cash compensation package that is linked to the EBIT performance of the Company. The balance of his compensation package is not linked to the Company’s performance. Key management personnel compensation The aggregate compensation of the key management personnel of the Consolidated Entity and the Company is set out below: Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments Consolidated 2006 2005 Company 2006 2005 1,348,800 99,192 28,075 - 57,560 1,533,627 1,102,654 84,235 24,621 - 26,700 1,238,210 903,391 61,682 4,789 - 31,760 1,001,622 621,044 42,951 13,372 - 1,800 679,167 The compensation of each member of the key management personnel of the Consolidated Entity is set out on the following page: 71 Notes to the Financial Report 5 7 8 2 8 , 1 4 5 4 4 3 , - 0 0 5 4 5 , 0 0 5 4 5 , 8 8 2 3 4 , 0 1 4 3 3 1 , 2 9 0 6 4 1 , 6 1 4 2 4 1 , 3 8 4 4 1 3 , 2 2 5 7 1 2 , l a t o T $ , 7 2 6 3 3 5 1 , - 0 0 5 4 5 , 5 9 9 7 0 3 , 0 5 1 8 3 , 0 5 1 8 3 , 8 7 6 2 1 1 , 4 9 6 7 2 1 , 1 2 4 4 5 2 , 2 9 2 2 3 1 , 0 3 3 2 7 1 , , 0 1 2 8 3 2 1 , t n e m y a p d e s a b - e r a h S n o i t a n m r e T i - g n o l r e h t O t n e m y o p m E l t s o P l s t i f e n e b e e y o p m e m r e t - t r o h S (cid:3) (cid:12) (cid:71) (cid:72) (cid:88) (cid:81) (cid:76) (cid:87) (cid:81) (cid:82) (cid:70) (cid:11) (cid:3) (cid:81) (cid:82) (cid:76) (cid:87) (cid:68) (cid:86) (cid:81) (cid:72) (cid:83) (cid:80) (cid:82) (cid:38) (cid:3) (cid:79) (cid:72) (cid:81) (cid:81) (cid:82) (cid:86) (cid:85) (cid:72) (cid:51) (cid:3) (cid:87) (cid:81) (cid:72) (cid:80) (cid:72) (cid:74) (cid:68) (cid:81) (cid:68) (cid:48) (cid:3) (cid:92) (cid:72) (cid:46) (cid:19) (cid:22) n o i t a s n e p m o c l e n n o s r e p t n e m e g a n a m y e K ) c ( 72 r e h O t h s a C d e l t t e s d e l t t e s - y t i u q E s t i f e n e B m r e t e e y o p m e l s t i f e n e b r e h t O - r e p u S n o i t a u n n a r e h t O - n o N y r a t e n o m s u n o B & y r a a S l s e e f - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 0 6 7 5 2 , - - - - - 0 0 6 3 , 0 0 4 2 , 0 0 0 4 2 , 0 0 8 1 , 0 6 5 7 5 , - - - - - 0 0 6 0 0 2 1 , 0 0 0 4 2 , - 0 0 9 0 0 7 6 2 , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9 8 7 , 4 4 2 0 , 3 1 2 6 2 , 0 1 5 7 0 , 8 2 - 2 7 3 , 3 1 - - - - - 1 6 6 , 5 8 8 5 , 5 - 1 2 6 , 4 2 - - - - - - - - - - - - - - - - - - - - - - - - - - 0 0 5 , 4 0 0 5 , 4 4 6 5 , 3 2 1 5 1 , 3 1 0 1 3 , 5 7 5 6 , 0 1 2 5 8 , 5 2 8 5 6 , 1 1 2 9 1 , 9 9 0 0 5 , 4 0 0 5 , 2 2 - 0 5 1 , 3 0 5 1 , 3 - 1 5 6 , 9 5 1 6 , 9 5 6 9 , 7 1 4 0 7 , 3 1 5 3 2 , 4 8 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 0 6 , 8 2 2 8 2 , 2 4 6 7 , 8 2 6 4 9 , 0 1 8 6 0 , 4 1 4 1 3 , 9 5 7 9 , 3 9 - 3 2 1 , 2 2 - - - - 2 1 6 , 9 5 9 7 , 6 1 5 3 , 9 7 5 3 , 6 8 3 2 , 4 5 - - - - - - - - - 3 2 0 , 9 0 5 9 , 4 5 3 7 9 , 3 6 - - - - - - - - - - - 5 7 8 , 2 8 7 2 8 , 1 6 2 - 0 0 0 , 0 5 0 0 0 , 0 5 8 8 2 , 3 4 2 7 4 , 2 8 0 0 9 , 4 3 1 3 1 4 , 8 1 1 9 3 5 , 7 3 2 8 3 5 , 9 2 1 2 5 8 , 0 9 1 , 1 - 0 0 0 , 0 5 0 0 0 , 0 5 2 0 0 0 , 5 3 0 0 0 , 5 3 8 7 0 , 2 1 1 1 3 2 , 7 0 1 0 0 0 , 0 0 2 8 3 8 , 6 0 1 9 6 2 , 2 5 1 6 1 4 , 8 4 0 , 1 ) i ( ) i i ( ) i i i ( ) v i ( ) v ( ) i v ( ) i ( ) i i ( ) i i i ( ) v i ( ) v ( ) i v ( ) i i v ( s t h g R & i s t i n U s n o i t p O & s e r a h S $ $ $ $ $ $ $ $ $ $ $ $ s e t o N r o t c e r i D e v i t u c e x E n o N , y r r e M - l A H H r o t c e r i D e v i t u c e x E n o N , y l l e K W R r o t c e r i D e v i t u c e x E n o N , o d n u D A K r o t c e r i D e v i t u c e x E n o N , n a m e e r F R I - r o t c e r i D e v i t u c e x E n o N , l i ' e N O P J r o t c e r i i D g n g a n a M , y a w e g d R W B i n a m r i a h C , n o t s r u B F I 6 0 0 2 n a m e e r F R I r M o t e t a n r e t l A r e l l o r t n o C l i i a c n a n F p u o r G l i , y e n K L D , C M A : r e g a n a M l a r e n e G , n o t s e W E G * n o r t r u S : r e g a n a M , d r a y n u M S C n o r t r u S & e c A n a m r i a h C , n o t s r u B F I 5 0 0 2 y r a t e r c e S y n a p m o C , s n o y L J S r o t c e r i i D g n g a n a M , y a w e g d R W B i r o t c e r i D e v i t u c e x E n o N , y r r e M - l A H H , C M A : r e g a n a M l a r e n e G , n o t s e W E G n o r t r u S : r e g a n a M , d r a y n u M S C n o r t r u S & e c A l i s a r e n M x e d m I : r e g a n a M l a r e n e G , n a T I r e l l o r t n o C l i i a c n a n F p u o r G l i , y e n K L D r o t c e r i D e v i t u c e x E n o N , y l l e K W R r o t c e r i D e v i t u c e x E n o N , o d n u D A K y r a t e r c e S y n a p m o C , s n o y L J S . n o r t r u S f o r e g a n a M s a y t i c a p a c i s h n i t o n , l o o T e r o C e c A e h t f o l t n e m p o e v e d e h t o t n o i t a e r n l i e n o d k r o w r o f r a e y t n e r r u c e h t g n i r u d 0 5 9 , 4 5 $ i f o s u n o b a d a p s a w d r a y n u M S C - * Notes to the Financial Report (cid:22)(cid:19) (cid:46)(cid:72)(cid:92)(cid:3)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:51)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:81)(cid:72)(cid:79)(cid:3)(cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (i) The Managing Director, Mr B W Ridgeway does not, currently, have a service contract with the Company. The Managing Director’s compensation is reviewed and determined by the Remuneration Committee. The Managing Director has a short term incentive bonus amounting to 20% of his cash compensation package that is linked to the EBIT performance of the Company. The balance of his compensation package is not linked to the Company’s performance. In the current year, following approval by members in General Meeting, Mr Ridgeway was granted 2,000,000 options. The options carry no rights to dividends and no voting rights. They expire on their expiry date or three calendar months after ceasing to be a Director, and may be exercised after 2 years and at any time to their expiry date. The percentage of the value of compensation that consisted of options was 7.5%. (ii) Mr H H Al-Merry is the President and owner of Rashid Trading Establishment (RTE), which was involved in a Joint Venture with Imdex Limited in the Middle East. Mr Al-Merry is remunerated directly by the RTE/Imdex Joint Venture. (iii) Mr S J Lyons was party to a consulting agreement with Imdex Limited until 31 December 2005. This agreement was set out on a fixed fee basis and prescribed other general terms and conditions. The consulting agreement was terminated and from 1 January 2006 onwards Mr Lyons is party to a service contract with Imdex Limited, which sets out a fixed compensation package, reviewable annually. The service contract specifies a two month notice period in the event that the contract is terminated. There are no termination benefits specified in this contract. Additional performance incentives may be agreed between Mr Lyons and the Company from time to time. In the current year, Mr Lyons was granted 150,000 options, along with other staff of the Group, under the Staff Option Scheme as set out in Note 31. The percentage of the value of compensation that consisted of options was 2.5%. (iv) Mr D L Kinley is a party to a service contract with Imdex Limited, which sets out a fixed compensation package, reviewable annually. The service contract specifies a one month notice period in the event that the contract is terminated. There are no termination benefits specified in this contract. Additional performance incentives may be agreed between Mr Kinley and the Company from time to time. In the current year, Mr Kinley was granted 100,000 options, along with other staff of the Group, under the Staff Option Scheme as set out in Note 31. The percentage of the value of compensation that consisted of options was 1.7%. (v) Mr G E Weston is party to a service contract with the Australian Mud Company Pty Ltd, which sets out a fixed compensation package, reviewable annually. The service contract stipulates a 12 month notice period in the event that the contract is terminated. There are no termination benefits specified in this contract. Performance incentives may be agreed between Mr Weston and the Australian Mud Company Pty Ltd from time to time. Additionally, Mr Weston is party to a deed with Imdex Limited, in respect of which Mr Weston has a right of first refusal in the event that Imdex receives an offer to purchase 100% of the shares held by Imdex in the Australian Mud Company Pty Ltd. This ‘right’ lapses automatically should Mr Weston no longer be employed by the Australian Mud Company Pty Ltd. In the current year, Mr Weston was granted 1,000,000 options, along with other staff of the Group, under the Staff Option Scheme as set out in Note 31. The percentage of the value of compensation that consisted of options was 7.6%. (vi) Mr C S Munyard is a party to a service contract with Surtron Technologies Pty Ltd, which sets out a fixed compensation package reviewable annually. The service contract specifies a one month notice period in the event that the contract is terminated. There are no termination benefits specified in this contract. Additional performance incentives may be agreed between Mr Munyard and Surtron Technologies Pty Ltd from time to time. In the current year, Mr Munyard was granted 75,000 options, along with other staff of the Group, under the Staff Option Scheme as set out in Note 31. The percentage of the value of compensation that consisted of options was 0.8%. (vii) Mr I Tan is party to a service contract with Imdex Limited, which sets out a fixed compensation package, reviewable annually. The service contract specifies a one month notice period in the event that the contract is terminated. There are no termination benefits specified in this contract. Mr Tan was not granted any options during the prior year due to his limited tenure at the time the Staff options were issued. 73 Notes to the Financial Report (cid:54)(cid:87)(cid:68)(cid:73)(cid:73)(cid:3)(cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:3) (cid:22)(cid:20) (a) Share Based Payment Arrangements Staff Option Plan The Consolidated Entity has in place a Staff Option Scheme (Scheme) to reward employees (including Key Management Personnel) for their past services as well as provide an incentive for future efforts. The terms and conditions of the Scheme are set out in the Scheme Rules with the Board of Directors responsible for the administration of the Scheme. The options carry no rights to dividends and no voting rights. The options expire on their expiry date. The number of options granted to staff is generally based on an assessment of the performance of that staff member as determined by the Board of Directors. Staff are only eligible to receive options when they have been with the Company in excess of 12 months. Generally the options will also be taken to have expired when the option holder ceases to be employed by the Consolidated Entity. As at 30 June 2006 all of the options had vested. Non-Executive Directors' Options In accordance with ASX Principles of Good Corporate Governance, Non-Executive Directors do not receive options. Managing Directors' Options The options issued to the Managing Director have been approved by members in General Meeting. The options carry no rights to dividends and no voting rights. The options expire on their expiry date or three calendar months after ceasing to be a Director, and may be exercised after 2 years at any time to their expiry date. As at 30 June 2006 all of the options had vested. Corporate Advisors Options During the prior year options were issued to Corporate Advisors of the Company as a performance incentive. The options carry no rights to dividends and no voting rights. As at 30 June 2006 all of the options had vested. (b) The following share based payment arrangements were in existence during the period: 2006 Issue Date Vesting Date Expiry Date Exercise Price $ Fair Value at Grant Date $ Opening balance Issued current year Number of Options Exercised current year Lapsed current year Closing balance Staff Options Tranche 1 Tranche 2 1-Aug-04 1-Feb-06 1-Aug-04 1-Feb-06 31-Jul-09 0.20 31-Jan-11 0.35 0.01 0.02 3,160,000 - 2,680,000 - (51,667) (60,000) - (20,000) 3,048,333 2,660,000 Managing Directors' Options Tranche 1 15-Sep-05 15-Sep-05 Corporate Advisors Options Tranche 1 (i) Tranche 2 (ii) Tranche 3 (i) 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 14-Sep-10 0.30 0.01 - 2,000,000 - - 2,000,000 31-Jul-09 0.20 31-Oct-07 0.20 31-Oct-07 0.35 0.03 0.02 0.01 100,000 2,000,000 1,000,000 - - - 100,000 - - - 2,000,000 - - - 1,000,000 6,260,000 4,680,000 (51,667) (80,000) 10,808,333 2005 Staff Options Tranche 1 1-Aug-04 1-Aug-04 31-Jul-09 0.20 0.01 - 3,210,000 - (50,000) 3,160,000 Directors' Options Tranche 1 Tranche 2 Tranche 3 25-Oct-01 25-Oct-01 25-Oct-01 25-Oct-01 25-Oct-01 25-Oct-01 24-Oct-04 0.20 0.03 24-Oct-04 0.35 0.01 24-Oct-04 0.45 0.01 1,000,000 1,000,000 1,000,000 - - - - (1,000,000) - (1,000,000) - (1,000,000) - - - Corporate Advisors Options Tranche 1 (i) Tranche 2 (ii) Tranche 3 (i) 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 23-Dec-04 31-Jul-09 0.20 0.03 31-Oct-07 0.20 0.02 31-Oct-07 0.35 0.01 - 100,000 - 2,000,000 - 1,000,000 - - - - 100,000 - 2,000,000 - 1,000,000 3,000,000 6,310,000 - (3,050,000) 6,260,000 (i) Exercisable at any time up to expiry. (ii) Exercisable at any time after Imdex shares trade at 30 cents for 5 consecutive trading days. This condition has been satisfied. 74 Notes to the Financial Report (cid:22)(cid:20) (cid:54)(cid:87)(cid:68)(cid:73)(cid:73)(cid:3)(cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (c) Fair value of options granted during the financial year The weighted average fair value of the share options granted during the financial year is $0.02 (2005: $0.02). Options were priced using a Black- Scholes option pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations. Expected volatility is based on the historical share price volatility for the preceding 12 months. 2006 Inputs into the model Grant date share price ($) Exercise price ($) Expected volatility Option life (years) Lack of marketability discount Risk-free interest rate Dividend yield 2005 Inputs into the model Grant date share price ($) Exercise price ($) Expected volatility Option life (years) Lack of marketability discount Risk-free interest rate Dividend yield Managing Directors Options Tranche 1 Staff Options Tranche 2 0.29 0.35 20% 5.00 40% 5.75% 0.00% 0.20 0.30 9% 5.00 40% 5.75% 0.00% Staff Options Tranche 1 Corporate Advisors Options Tranche 1 Corporate Advisors Options Tranche 2 Corporate Advisors Options Tranche 3 0.13 0.20 36% 5.00 40% 5.50% 0.00% 0.19 0.20 36% 4.50 40% 5.50% 0.00% 0.19 0.20 36% 3.85 40% 5.50% 0.00% 0.19 0.35 36% 3.80 40% 5.50% 0.00% (d) Exercised during the financial year The following options under the Staff Option Plan were exercised during the financial year: Option Series Staff Options Tranche 1 Staff Options Tranche 1 Staff Options Tranche 1 Number Exercised Exercise Date Share Price at Exercise Date 16,667 25,000 10,000 51,667 15-Nov-05 1-Feb-06 29-Jun-06 0.30 0.41 0.58 (cid:54)(cid:88)(cid:69)(cid:86)(cid:72)(cid:84)(cid:88)(cid:72)(cid:81)(cid:87)(cid:3)(cid:40)(cid:89)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:22)(cid:21) Effective 1 August 2006 the Company acquired 100% of the shares of the Swedish-based Reflex Group (Reflex) and the United Kingdom-based Chardec Consultants Limited (Chardec). The purchase price for Reflex is $25.4 million to be settled $15 million in cash at settlement and the issue of a convertible note with a face value of $10.4 million. The convertible note carries the right to convert into 20.8 million Imdex shares at a price of 50 cents per share at any time until 30 June 2008. The coupon rate will be 8% per annum. Under the terms of the agreement, conversion will be triggered automatically by the Imdex share price reaching $1 per share. Any Imdex shares issued under this note prior to 30 June 2008 will be held in voluntary escrow until 30 June 2008. The purchase price for Chardec is GBP6.8 million (approximately $17 million) to be satisfied through the payment of GBP2.5 million in cash at settlement and a further GBP4.3 million over three years from date of settlement. Additional disclosures with respect to these acquisitions are impracticable at this stage as the acquisition accounting is still being finalised. Subsequent to year end the Directors declared a 1 cent per share fully franked dividend with an entitlement date of 10 October 2006 and a payment date of 13 October 2006. The effect of this dividend has not been reflected in this financial report. 75 Notes to the Financial Report (cid:22)(cid:22) (cid:44)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:71)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3) The Consolidated Entity changed its accounting policies on 1 July 2005 to comply with Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). The transition to A-IFRS is accounted for in accordance with Accounting Standard AASB 1 ‘First time Adoption of Australian Equivalents to International Financial Reporting Standards’, with 1 July 2004 as the date of transition, except for financial instruments, including derivatives, where the date of transition is 1 July 2005 (refer note 1(a)). An explanation of how the transition from superseded policies to A-IFRS has affected the company and Consolidated Entity’s financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables. (a) Effect of A-IFRS on the balance sheet as at 1 July 2004 Consolidated Company Superseded policies * Effect of transition to A- A-IFRS Superseded policies * Effect of transition to A- A-IFRS Notes $’000 IFRS $’000 $’000 $’000 IFRS $’000 $’000 Current Assets Cash Assets Receivables Inventories Current Tax Assets Other Non Current Assets classified as held for sale Total Current Assets Non Current Assets Receivables Other Financial Assets Property, Plant and Equipment Exploration, Evaluation and Development Expenditure Intangibles Deferred Tax Assets Total Non Current Assets Total Assets Current Liabilities Payables Interest Bearing Liabilities Current Tax Liabilities Provisions Liabilities directly associated with Non Current Assets classified as held for sale Total Current Liabilities Non Current Liabilities Interest Bearing Liabilities Deferred Tax Liabilities Provisions Total Non Current Liabilities Total Liabilities Net Assets Equity Contributed Equity Asset Revaluation Reserve Foreign Currency Translation Reserve Employee Equity Settled Benefits Reserve Retained Profits/(Accumulated Losses) Total Equity (i) (i) (i) (iv) (ii) (i) (ii) (iii) (vi) 56 9,355 6,340 - 8 - 15,759 - 5,412 11,771 641 - 594 18,418 34,177 7,220 4,429 38 640 - 12,327 3,238 370 130 3,738 16,065 18,112 21,058 8 - - - - - - - - - - - (1,000) (641) - 387 (1,254) (1,254) - - - (161) 56 9,355 6,340 - 8 - 15,759 - 5,412 10,771 - - 981 17,164 32,923 7,220 4,429 38 479 - (161) - 12,166 - - 161 161 - (1,254) - - - - 3,238 370 291 3,899 16,065 16,858 21,058 8 - - 35 2,548 947 22 - - 3,552 - 6,917 7,429 641 - 260 15,247 18,799 2,482 3,898 - 203 - 6,583 4,405 370 50 4,825 11,408 7,391 21,058 8 - - - - - - - - - - - (1,000) (641) - 387 (1,254) (1,254) - - - (50) - (50) - - 50 50 - (1,254) - - - - 35 2,548 947 22 - - 3,552 - 6,917 6,429 - - 647 13,993 17,545 2,482 3,898 - 153 - 6,533 4,405 370 100 4,875 11,408 6,137 21,058 8 - - (2,954) 18,112 (1,254) (1,254) (4,208) 16,858 (13,675) 7,391 (1,254) (1,254) (14,929) 6,137 * Reported financial position for the financial year ended 30 June 2004 76 Notes to the Financial Report (cid:22)(cid:22) (cid:44)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:71)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (b) Effect of A-IFRS on the income statement for the financial year ended 30 June 2005 Consolidated Company Superseded policies * Effect of transition to A- A-IFRS Superseded policies * Effect of transition to A- A-IFRS Notes $’000 IFRS $’000 $’000 $’000 IFRS $’000 $’000 Revenue from sale of goods and rendering of services Other revenue from ordinary activities Total revenue Other income Write down of property, plant and equipment of Imdex Minerals to recoverable amount Raw Materials and Consumables Used Other expenses from ordinary activities Employee benefit expenses Depreciation and amortisation expense Borrowing costs Profit before income tax expense Income tax expense relating to ordinary activities Profit from continuing operations Profit/(loss) from discontinued operations (v) (i) (v) (v) (i) (i) (i) (iii) (i) (iii) (i) (i) (i) (i) 46,835 1,335 48,170 - (6,784) 40,051 (1,335) (8,119) 466 - 40,051 466 (1,370) 1,370 - (21,637) 2,035 (19,602) (10,661) (8,569) (1,949) (529) 3,455 3,494 1,710 559 35 (7,167) (6,859) (1,390) (494) 13,986 1,959 15,945 - (1,370) (6,103) (4,569) (3,078) (1,040) (359) (6,784) 7,202 (1,959) (8,743) 1,752 - 7,202 1,752 1,370 - 2,035 (4,068) 2,832 1,710 (1,737) (1,368) 559 35 (481) (324) 1,550 5,005 (574) 1,550 976 (383) (1,340) (1,723) 431 (1,340) (909) 3,072 210 3,282 (143) 210 67 Profit for the period 3,072 1,100 4,172 Profit attributable to minority interest - - - - 890 890 - (143) - 890 1,100 - 890 957 - Profit attributable to ordinary equity holders of Imdex Limited 3,072 1,100 4,172 (143) 1,100 957 * Reported financial results for the financial year ended 30 June 2005 77 Notes to the Financial Report (cid:22)(cid:22) (cid:44)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:71)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (c) Effect of A-IFRS on the balance sheet as at 30 June 2005 Consolidated Company Superseded policies * Effect of transition to A- A-IFRS Superseded policies * Effect of transition to A- A-IFRS IFRS IFRS Notes $'000 $'000 $'000 $'000 $'000 $'000 Current Assets Cash Assets Receivables Inventories Current Tax Assets Other Non Current Assets classified as held for sale Total Current Assets Non Current Assets Receivables Other Financial Assets Property, Plant and Equipment Exploration, Evaluation and Development Expenditure Intangibles Deferred Tax Assets Total Non Current Assets Total Assets Current Liabilities Payables Interest Bearing Liabilities Current Tax Liabilities Provisions Liabilities directly associated with Non Current Assets classified as held for sale Total Current Liabilities Non Current Liabilities Interest Bearing Liabilities Deferred Tax Liabilities Provisions Total Non Current Liabilities Total Liabilities Net Assets Equity Contributed Equity Asset Revaluation Reserve Foreign Currency Translation Reserve Employee Equity Settled Benefits Reserve Retained Profits/(Accumulated Losses) Total Equity (i) (i) (i) (iv) (i) (ii) (i) (ii) (iii) (vi) 103 13,920 8,356 - 18 - 22,397 - 1,475 10,414 601 12 664 13,166 35,563 7,972 4,047 574 859 - 13,452 2,883 - 103 2,986 16,438 19,125 19,008 - - - 117 19,125 - - - - - 5,125 5,125 - - (4,524) (601) - (105) (5,230) (105) - (82) - (290) 103 13,920 8,356 - 18 5,125 27,522 - 1,475 5,890 - 12 559 7,936 35,458 7,972 3,965 574 569 182 (190) 182 13,262 - - 190 190 - (105) - - - 48 2,883 - 293 3,176 16,438 19,020 19,008 - - 48 96 4,556 2,249 - 3 - 6,904 - 2,984 6,571 601 12 329 10,497 17,401 2,526 4,698 531 247 - 8,002 4,172 - 38 4,210 12,212 5,189 19,008 - - - - - - - - 96 4,556 2,249 - 3 5,125 5,125 5,125 12,029 - - (4,524) (601) - (105) (5,230) (105) - (82) - (140) - 2,984 2,047 - 12 224 5,267 17,296 2,526 4,616 531 107 182 (40) 182 7,962 - - 40 40 - (105) - - - 48 4,172 - 78 4,250 12,212 5,084 19,008 - - 48 (153) (105) (36) 19,020 (13,819) 5,189 (153) (105) (13,972) 5,084 * Reported financial position for the financial year ended 30 June 2005 78 Notes to the Financial Report (cid:22)(cid:22) (cid:44)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:71)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) (d) Effect of A-IFRS on the cash flow statement for the financial year ended 30 June 2005 There are no material differences between the cash flow statement presented under A-IFRS and the cash flow statement presented under the superseded policies. (e) Notes to the reconciliations of income and equity (i) Adjustments arising from the Business of Imdex Minerals 30 June 2004 30 June 2005 Notes $’000 $’000 Income Statement Adjustments Revenue Raw materials Other expenses from ordinary activities Employee benefit expenses Depreciation and amortisation Borrowing costs Other Income tax expense (Profit) from discontinued operation shown as a separate line item on the Income Statement Reversal of depreciation and amortisation on impaired assets Reversal of depreciation on Imdex Minerals from 1 Feb 2005 when the business was classified as held for sale Reversal of AGAAP write down at 30 June 2005 Other Income tax expense applicable to depreciation and amortisation reversal Net adjustments to current period profits Balance Sheet Adjustments Reclassification of Non Current Assets held for sale Reclassification of liabilities associated with Non Current Assets held for sale Specific adjustments relating to the impairment of the Micaceous Iron Oxide Impairment of Property, Plant & Equipment Reversal of depreciation on impaired Property, Plant & Equipment Reversal of depreciation on Imdex Minerals from 1 Feb 2005 when the business was classified as held for sale Other Reversal of AGAAP write down at 30 June 2005 Reclassification of Non Current Assets held for sale Impairment of Exploration, Evaluation and Development Expenditure Reversal of associated amortisation on Exploration, Evaluation and Development Expenditure Deferred tax asset adjustment relating to the impairment (aa) (bb) (aa), (bb) (aa) (aa) (bb) (bb) (aa) (bb) - - - - - - - - - - - - - - - - - (1,000) - - - - - (1,000) (641) - (641) 387 (6,784) 2,035 2,650 1,734 256 35 32 (848) (890) 120 183 1,370 (31) (492) 1,150 5,125 182 (1,000) 79 183 (31) 1,370 (5,125) (4,524) (641) 40 (601) (105) 79 Notes to the Financial Report (cid:22)(cid:22) (cid:44)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:71)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) The table above sets out the adjustments that arise from the impairment write down and the classification of the Imdex Minerals business as held for sale. With reference to the table: (aa) Non Current Assets Held for Sale Under A-IFRS, when the carrying amount of a group of assets is expected to be recovered principally through a sales transaction, rather than continuing use, such assets must be classified as held for sale. Assets held for sale are shown separately on the balance sheet and their results (after tax) as a single amount on the Income Statement. In addition, depreciation for such assets ceases from this point. The business of Imdex Minerals met the definition of held for sale from 1 February 2005 and accordingly depreciation has ceased from this date. This has resulted in a reduction in depreciation expense of $183k in the year ended 30 June 2005. The profit from discontinued operations for the years ended 30 June 2005, reflect the transfer of Minerals’ revenue, expenses and income tax into a single amount on the Income Statement. (bb) Impairment of Assets Under AGAAP assets are written down to recoverable amount when the asset’s carrying value exceeds its recoverable amount. Under A-IFRS, both current and non current assets are tested annually for impairment. In addition, A-IFRS has a more prescriptive impairment test, and requires, for instance, discounted cash flows to be used where value in use is used to assess recoverable amount. Under A-IFRS, based on a review of discounted cash flows of the Micaceous Iron Oxide business, which is a separate ‘cash generating unit’ of the business of Imdex Minerals, a write down of $1,000k for plant and equipment and $641k for exploration, evaluation and development expenditure carried forward is required at 30 June 2004. Under AGAAP at 30 June 2004, the business of Imdex Minerals was assessed for recoverability, however as the business was assessed as a whole and not at the ‘cash generating unit’ level as required under A-IFRS no write down was indicated at that time. As set out in the 2005 Annual Report, the carrying value of Imdex Minerals was written down under AGAAP by $1.37millon at 30 June 2005. Due to the A-IFRS impairment required at 30 June 2004, this write down has been reversed through the income statement for the year ended 30 June 2005. The decrease in the carrying value of property, plant and equipment and the carry forward exploration, evaluation and development expenditure has resulted in a reduction in depreciation and amortisation expense of $303k in the year ended 30 June 2005. (ii) Non Current Employee Benefits Under AGAAP, provision for Annual Leave (short-term employee benefit) was measured at nominal amounts and classified as a current liability. Under AASB119 "Employee Benefits" liabilities for short-term employee benefits continue to be measured at their nominal amounts, however employee benefits not expected to be settled within 12 months are measured at their present value. (iii) Share Based Payments For the year ended 30 June 2005, share based payments of $48k to employees and consultants were not recognised under AGAAP. Corresponding entries have been made to shareholders equity at 30 June 2005. There is no tax effect of these payments. (iv) Income Tax Under AGAAP, the Consolidated Entity adopted tax effect accounting principles whereby the income tax expense was calculated on pre-tax accounting profits after adjusting for permanent differences. The tax effect of timing differences, which occur when items were included or allowed for income tax purposes in a period different to that for accounting were recognised at current taxation rates as deferred tax assets and deferred tax liabilities, as applicable. Under A-IFRS, deferred tax is determined using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the Financial Report and their corresponding tax bases. 80 Notes to the Financial Report (cid:22)(cid:22) (cid:44)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:71)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)(cid:3) Effect of A-IFRS adjustments on deferred tax balances Deferred tax adjustments resulting from the adjustments required under A-IFRS Net increase/(decrease) to deferred tax balances Effect of A-IFRS adjustments on income tax expense Adjustment required to income tax expense Net increase/(decrease) in income tax expense (v) Revenue Consolidated and Company 30 June 2004 30 June 2005 $’000 $’000 387 387 (105) (105) Consolidated and Company Year ending 30 June 2005 $’000 (575) (575) Under AGAAP, the proceeds on sale of non current assets were included in revenue with the cost of sale recorded in expenses. Under A-IFRS, the net gain or loss from the sale of non current assets is recognised as Other Income in the Income Statement. Similarly, income from Grants and other non operating income has been recognised in Other Income, rather than included as part of Other Revenue. There is no net impact on the profit for the period as a result of these adjustments. (vi) Retained profits The effect on retained profits of the adjustments described above is set out below. Consolidated and Company 30 June 2004 30 June 2005 Notes $’000 $’000 Retained earnings Impairment of the business of Imdex Minerals Adjustment to depreciation and amortisation expense for the business of Imdex Minerals due to its impairment and classification as held for sale Reversal of the write down of Imdex Minerals to its recoverable amount Expensing share based payments Other Adjustments to tax balances Total adjustment to retained earnings (i) (i) (i) (iii) (iv) (1,641) (1,641) - - - - 387 (1,254) 303 1,370 (48) (32) (105) (153) 81 Additional Stock Exchange Information as at 21 August 2006 (a) Distribution of Shareholders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over Holding less than a marketable parcel (b) Substantial Shareholders Ordinary Shareholders Souls Private Equity Limited Quadripart Investment Holdings (Pty) Ltd J P Morgan Nominees Australia Limited Fully Paid Ordinary Shares Options 50 344 380 880 144 1,798 26 - 4 18 66 6 94 - Fully Paid Number Percentage 12,889,885 12,847,202 5,603,783 9.24% 9.21% 4.02% (c) Twenty Largest Holders of Quoted Equity Securities Ordinary Shareholders Souls Private Equity Limited Quadripart Investment Holdings (Pty) Ltd J P Morgan Nominees Australia Limited Mr William Wavish Wear Services Pty Ltd Chelverton Dividend Income Fund Limited Iscosa (Pty) Ltd Citicorp Nominees Pty Limited Telic Alcatel (Australia) Pty Ltd National Nominees Limited Cogent Nominees Pty Limited Mr Petrus Cornelius Nicolaas Middendorp ANZ Nominees Limited Primbee Investments Pty Ltd Longo Pty Ltd Chippell Pty Ltd Fully Paid Number Percentage 12,889,885 12,847,202 5,603,783 5,542,000 5,000,000 3,775,262 3,211,800 3,169,010 2,840,000 2,290,700 1,861,762 1,753,500 1,715,000 1,615,921 1,572,826 1,210,273 9.24% 9.21% 4.02% 3.97% 3.58% 2.71% 2.30% 2.27% 2.04% 1.64% 1.33% 1.26% 1.23% 1.16% 1.13% 0.87% 71,050,424 50.94% 82 Additional Stock Exchange Information as at 21 August 2006 (d) Director and Company Secretary Shareholdings Name Mr B W Ridgeway (indirectly) Mr I F Burston (indirectly) Mr H H Al-Merry (directly) Mr R W Kelly (indirectly) Mr K A Dundo (directly) Mr I R Freeman (indirectly) Mr J P O’Neil (indirectly) Mr S J Lyons (directly) Number of Shares Number of Options 5,000,000 200,000 755,000 265,000 300,000 16,059,002 12,847,202 50,000 35,476,204 2,000,000 - - - - - - 200,000 2,200,000 (e) Interests in Mining Tenements Due to the disposal of Imdex Minerals on 1 July 2005, Imdex no longer holds an interest in any mining tenements at the date of this report. (f) Company Secretary Mr Stephen John Lyons (g) Registered Office Level 3, Redgum House 18 Richardson House West Perth Western Australia Phone: (08) 9481 5777 (g) Share Registry Computershare Investory Services Level 2 45 St Georges Terrace Perth WA 6000 Phone: (08) 9323 2000 83 F This page has been left blank intentionally. 84 Contents Imdex at a glance Imdex 2006 Snapshot Chairman’s Report Managing Director’s Report Director Proﬁ les Financial Report 2006 1 3 6 9 14 17 Registered Ofﬁ ce Imdex Limited, ABN 78 008 947 813 Level 3, Redgum House 18 Richardson Street West Perth, Western Australia, 6005 PO Box 1325 West Perth WA 6872 Telephone: (+61 8) 9481 5777 Facsimile: (+61 8) 9481 6527 Email: Website: www.imdex.com.au imdex@imdex.com.au Imdex is listed on the Australian Stock Exchange under the ASX code IMD Group Head Office & Registered Office Imdex Limited Level 3, Redgum House 18 Richardson Street WEST PERTH WA 6005 PO Box 1325 WEST PERTH WA 6872 Telephone: +61 8 9481 5777 Facsimile: +61 8 9481 6527 Email: imdex@imdex.com.au Divisions/subsidiaries Australian Mud Company Pty Ltd 5 Pitino Court OSBORNE PARK WA 6017 PO Box 1141 OSBORNE PARK WA 6916 Telephone: +61 8 9445 4000 Facsimile: +61 8 9445 4040 Email: gweston@imdex.com.au Samchem Drilling Fluids & Chemicals Pty Ltd 31 Basalt Street Alrode Ext 7 PO Box 167671 BRACKENDOWNS 1456 South Africa Telephone: +2711 908 5595 Facsimile: +2711 908 5887 Email: samchem@acenet.co.za Surtron Technologies Pty Ltd 5 Pitino Court OSBORNE PARK WA 6017 PO Box 1130 OSBORNE PARK WA 6916 Telephone: +61 8 9445 4050 Facsimile: +61 8 9445 4060 Email: smunyard@imdex.com.au Ace Drilling Products & Rentals 5 Pitino Court OSBORNE PARK WA 6017 PO Box 1148 OSBORNE PARK WA 6916 Telephone: +61 8 9445 4020 Facsimile: +61 8 9445 4040 Email: mgregg@imdex.com.au Reflex Instrument North America Ltd 70-C Mountjoy Street North, Suite 510 Timmins, Ontario, Canada P4N 4V7 Telephone: +1 877 235 2169 Facsimile: +1 705 235 2165 Email: reflexca@ntl.sympatico.ca Reflex Instrument South America Ltda Av, del Parque 4265, Piso 1 Huechuraba, Santiago, Chile Telephone: +56 9 0783 593 Facsimile: +56 2 247 9504 Email:pvazquez@reflexsouthamerica.cl Surtron Technologies Pty Ltd 5 Close Way KALGOORLIE WA 6430 Telephone: +61 8 9091 9511 Facsimile: +61 8 9091 9522 Email: jsmith@imdex.com.au Drillhole Surveying Instruments Pty Ltd T/A Reflex Africa P.O. Box 802, Sundowner, 2161 Unit F2, Metropolitan Park, Wakis Ave, Strijdompark Johannesburg, South Africa Telephone: +27 11 792 0452 Facsimile: +27 11 792 5927 Email:jannie.leeuwner@reflexafrica.co.za Reflex Instruments AB P.O. Box 118 SE-Vallentuna, Sweden Telephone: +46 8 511 80 610 Facsimile: +46 8 511 80 610 Email: info@reflex.se Chardec Consultants Ltd 3 Hyde Close, The Street Lewes BN7 3PA East Sussex Telephone: +44 1273 483 800 Facsimile: +44 1273 483 900 Email: rich@chardec.co.uk Surtron Technologies (UK) Ltd 22a Snowdon Place Stirling Scotland FK8 2JN Telephone: +44 1786 449 890 Email: jhunter@imdex.com.au Representative Offices Western Australia Australian Mud Company Pty Ltd 5 Close Way KALGOORLIE WA 6430 Telephone: +61 8 9021 2925 Facsimile: +61 8 9091 5925 Email: tmcwhinney@imdex.com.au Ace Drilling Products & Rentals 5 Close Way KALGOORLIE WA 6430 Telephone: +61 8 9021 2925 Facsimile: +61 8 9091 5925 Email: dmunro@imdex.com.au Surtron Technologies Pty Ltd Lot 1598 Willis Street NEWMAN WA 6753 PO Box 681 NEWMAN WA 6753 Tel/Facsimile: +61 8 9175 1230 New South Wales Australian Mud Company Pty Ltd 21 Illawarra Avenue CARDIFF NSW 2285 Telephone: +61 2 4953 6165 Facsimile: +61 2 4953 6448 Email: tfuller@imdex.com.au South Australia Australian Mud Company Pty Ltd 20 Alexandra Place ROSE PARK SA 5067 Telephone: +61 8 8364 4110 Facsimile: +61 8 8364 4151 Email: kbooth@imdex.com.au Queensland Australian Mud Company Pty Ltd 1/26 Neon Street SUMNER PARK QLD 4074 PO Box 110 SUMNER PARK QLD 4074 Telephone: +61 7 3279 3199 Facsimile: +61 7 3279 3538 Email: amcbrisbane@imdex.com.au Surtron Technologies Pty Ltd 1/26 Neon Street SUMNER PARK QLD 4074 PO Box 110 SUMNER PARK QLD 4074 Telephone: +61 7 3279 2331 Facsimile: +61 7 3279 3495 Email: surtronec@imdex.com.au International Sales Australian Mud Company Pty Ltd 31 Koala Court, Little Mountain CALOUNDRA QLD 4551 Telephone: +61 7 5437 0373 Facsimile: +61 7 5437 0886 Email: mskull@imdex.com.au www.imdex.com.au

Continue reading text version or see original annual report in PDF format above